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On Thursday, Equity LifeStyle Properties (NYSE:ELS) received an upgrade in its stock rating from Hold to Buy by analysts at Jefferies, who also increased the price target to $80.00, up from the previous $72.00. The upgrade is based on the assessment that the company's operational strengths, demographic benefits, and growth potential are not fully reflected in its current market valuation. According to InvestingPro data, the $13.3 billion market cap company maintains a "GOOD" financial health score, with 2 analysts recently revising their earnings estimates upward.
Equity LifeStyle Properties, which operates manufactured home (MH) communities, benefits from a consistent revenue stream, with approximately 90% of its income derived from annual contracts. The firm's portfolio is further strengthened by its focus on the 55+ age demographic, which accounts for over 70% of its MH communities.
These markets are projected to surpass the national average in job and household formation over the next five years. The company has demonstrated remarkable dividend consistency, maintaining payments for 32 consecutive years with a current yield of 2.87%.
The analysts at Jefferies anticipate that Equity LifeStyle's funds from operations (FFO) per share growth will accelerate to a mid-single-digit compound annual growth rate (CAGR) of around 6.5% from 2024 to 2027, a significant increase compared to the low-single-digit growth expected in 2023 and 2024. This forecast is supported by the company's strong demographic positioning and the expected market growth.
At the time of the upgrade, Equity LifeStyle's stock was trading at 21.9 times FFO, which is below its 5-year and 10-year average multiples of 25.3 and 23.8, respectively. Jefferies indicates that this presents an attractive entry point for investors considering the company's growth prospects and operational advantages.
In other recent news, Equity Lifestyle (NYSE:ELS) Properties has declared a Q4 dividend of $0.4775 per share, part of an annualized payout of $1.91 per share. This announcement reflects the company's ongoing financial strategy and commitment to providing value to its shareholders. The company also reported a 5.3% increase in normalized Funds From Operations (FFO) growth for Q3 2024 and raised its full-year 2024 normalized FFO guidance to $2.92 per share.
In addition, Equity Lifestyle Properties managed to raise approximately $314 million from a recent share sale, intending to repay a $300 million unsecured term loan. Despite a decline in seasonal revenue for the RV and Marina sectors, the company increased its core NOI before property management by 5.8% for Q3 and 6.2% year-to-date.
Looking ahead, Equity Lifestyle Properties anticipates a 5% average rent increase for 50% of MH residents in 2025 and a 5.5% average increase in RV annual rates. The company also projects a 6.3% growth in core property operating income for the year.
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