When Wall Street sustains a broad-based rally across different sectors, it’s a sign of market health. In a bull market, financials, energy, tech and healthcare stocks can all rise in tandem. Conversely, when multiple sectors are sold off, it’s usually a sign of a bearish market.
This is also true with real estate investment trusts (REITs), which have more than a dozen subsectors in their universe. Over the past month, many of the subsectors have begun to show improving performance after a difficult first quarter.
Seeing the improvements in earnings and performance, and perhaps sensing an end to the current interest rate hike cycle, analysts are beginning to upgrade more REITs than they were a few months ago. And another positive for REITs is that upgrades are being made across multiple subsectors.
Take a look at several REITs from different subsectors that have been upgraded by analysts within the past week — some with a potential upside of over 20% from present levels.
The market has a long history of overselling REITs when facing a potential recession, providing an incredible opportunity for investors to "lock in" massive yields. Gain access to insights from Benzinga's real estate research team with the free Weekly REIT Report.
EPR Properties EPR is a Kansas City, Missouri-based diversified experiential REIT that owns and operates 363 movie theater chains, amusement parks, ski resorts, fitness centers and other recreation venues across 44 states.
On April 26, EPR Properties reported first-quarter earnings. Funds from operations (FFO) of $1.26 beat the Street estimates by $0.07 and revenue of $171.4 million was above estimates of $150.62 million.
On June 20, JMP Securities analyst Mitch Germain upgraded EPR Properties from Market Perform to Market Outperform and announced a price target of $54.
From its most recent closing price of $43.69, that represents a potential upside of 23.6%.
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Agree Realty Corp. ADC is a Bloomfield Hills, Michigan-based net-lease REIT that focuses on retail properties. Its portfolio includes 1,908 properties totaling 40 million square feet across 48 states. Sixty-eight percent of its tenants are investment grade.
Agree Realty was founded as Agree Development Co. in 1971. It went public as a REIT in 1994 as Agree Realty Corp. and was listed on the New York Stock Exchange. Some of its largest tenants include well-known names like Walmart Inc. WMT, Best Buy Co. Inc. BBY and Kroger Co. KR.
On May 4, Agree Realty posted first-quarter earnings. FFO of $0.98 beat the estimates by a penny and was a penny above the first quarter of 2022. Revenue of $126.62 million was above estimates of $124.49 million and 28.75% higher than revenue of $98.34 million in the first quarter of 2022.
On June 22, Mizuho analyst Haendel St. Juste upgraded Agree Realty from Neutral to Buy and announced a price target of $70. From its most recent closing price of $65.03, that represents a potential upside of 7.64%.
Ventas Inc. VTR is a Chicago-based diversified healthcare REIT with over 1,200 properties that include senior living communities, life science, research and innovation properties, medical office, outpatient facilities and skilled nursing facilities. Ventas has been in business for over 20 years and is a member of the S&P 500.
On May 8, Ventas reported first-quarter earnings. FFO of $0.74 per share was 3 cents ahead of analyst estimates and in line with the first quarter of 2022. Revenue of $1.08 billion beat the estimates by over $21 million and was 5.87% higher than revenue in the first quarter of 2022.
On June 23, Raymond James analyst Jonathan Hughes upgraded Ventas from Outperform to Strong Buy and announced a $55 price target. From its most recent closing price of $44.47, that represents a potential upside of 23.68%.
Sunstone Hotel Investors Inc. SHO is an Aliso Viejo, California-based hotel REIT with 7,735 rooms in 15 hotels located on both U.S. coasts and Hawaii. Its hotel brands include Hyatt Regency, Marriott, Hilton and Four Seasons.
On May 5, Sunstone Hotel Investors reported its first-quarter operating results. FFO of $0.21 per share beat the estimates by $0.04 and was 162.5% above FFO of $0.08 per share in the first quarter of 2022. Revenue of $243.4 million beat the consensus estimate of $229.54 million by 6.04% and was a 41.25% increase over revenue of $172.31 in the first quarter of 2022.
Comparable revenue per available room (RevPAR) increased from the first quarter of 2022 by 32% to $218.82. Occupancy was just under 70%, up from 67% in the fourth quarter of 2022.
On June 27, Morgan Stanley analyst Stephen Grambling upgraded Sunstone Hotel from Underweight to Equal-Weight and raised the price target from $9 to $10. From its most recent closing price of $9.70, that represents a potential upside of 3.09%.
Although stock upgrades are meaningful, remember that analysts are only correct about 50% of the time, so investors are urged to do their own due diligence before purchasing any stock and not to rely solely on analysts’ opinions.
Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it’s too late. Benzinga’s in-house real estate research team has been working hard to identify the greatest opportunities in today’s market, which you can gain access to for free by signing up for Benzinga’s Weekly REIT Report.
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