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On Tuesday, Evercore ISI analysts raised their rating for Brixmor Property Group (NYSE:BRX), a $7.9 billion market cap retail REIT, from "In Line" to "Outperform," while maintaining a price target of $31.00. The upgrade follows Brixmor’s fourth-quarter performance, where revenue increased by 4.2% and same-store net operating income (SS NOI) grew by 4.7%. The company’s base rent gains, which rose by 600 basis points, were a significant contributor to this growth, despite being partially offset by a near doubling of uncollectible revenues due to tenant bankruptcies, among other factors. According to InvestingPro data, two analysts have recently revised their earnings estimates upward for the upcoming period.
Brixmor’s outlook for 2025 was also a key factor in the rating change. The company’s forecasted funds from operations (FFO) guidance, with a midpoint of $2.22, aligns with Evercore ISI’s estimates and current consensus. This projection includes an anticipated bad debt reserve and potential store closures from retailers such as Party City and Joann Stores. The analyst noted that the guidance for SS NOI growth, expected to be around 4% at the midpoint, was a positive surprise and might provide Brixmor with an opportunity to raise its guidance metrics throughout the year. The company maintains a healthy gross profit margin of 75.3% and has demonstrated its commitment to shareholder returns with a 10.6% dividend growth over the last twelve months, offering a current yield of 4.4%.
After incorporating the fourth-quarter results and adjusting some assumptions in their model, Evercore ISI increased their FFO estimates for 2025 and 2026 slightly to $2.23 and $2.36, respectively. The analysts pointed out that Brixmor’s stock has underperformed relative to the REIT index and its peers since the beginning of the year. They believe that the current stock price in the low $26 range presents an attractive entry point for investors, citing the stock’s valuation at 17 times the projected 2025 adjusted funds from operations (AFFO) and a 7.3% implied capitalization rate. However, InvestingPro’s Fair Value analysis suggests the stock may be slightly overvalued at current levels. For deeper insights into Brixmor’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The $31 price target set by Evercore ISI suggests a total return potential of 23%, which is notably higher than the average total return of 11% for the REIT sector. The analysts concluded that despite some tenant issues, Brixmor’s target of 4% SS NOI growth is one of the higher growth rates among its peers. Additionally, the projected mid-single-digit growth in FFO for the next two years is also above the peer average, further supporting the upgraded rating to "Outperform."
In other recent news, Brixmor Property Group has shown strong performance in its recent developments. The company reported a record occupancy level in the third quarter of 2024, with a 4.1% growth in same property Net Operating Income (NOI) and an increase in its full-year funds from operations (FFO) guidance. Brixmor’s management has been focusing on a clustering strategy in key markets and managing space recapture from bankrupt retailers.
In addition, Brixmor has extended the employment agreement of its Executive Vice President and Chief Investment Officer, Mark T. Horgan, until May 19, 2028. This extension includes a boost in Horgan’s base salary and his annual equity compensation level, signaling the company’s commitment to its executive leadership. The specific figures regarding the salary and equity increase were not disclosed.
BMO Capital has upgraded Brixmor’s stock rating from Market Perform to Outperform, based on expectations of strong FFO growth in 2025. The upgrade reflects a positive outlook on the company’s financial growth despite prevailing uncertainties.
These recent developments indicate Brixmor’s proactive approach to leadership stability, investment expertise, and strategic acquisitions. It’s worth noting that the company’s strategic actions are taken in a challenging and evolving real estate market.
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