Jefferies starts Easterly Government Properties with Buy rating

On Monday, Jefferies initiated coverage on Easterly Government Properties (NYSE:DEA), assigning a Buy rating to the company’s stock along with a price target of $13.00, representing a potential 23% upside from the current price of $10.57. The firm’s analysis acknowledges the challenges faced by the company in recent years, which have been attributed to a lack of earnings growth due to constraints on the cost of capital. According to InvestingPro data, the company maintains a significant 10% dividend yield, making it attractive for income-focused investors.

The analyst from Jefferies commented on the current market sentiment towards Easterly Government Properties, noting that while the focus on the Department of Defense’s Office of Economic Adjustment (DOGE) is understandable, the market has largely accounted for this in the company’s valuation. The analyst emphasized that the execution of Easterly Government Properties’ strategy is likely to demonstrate that the company does not possess the typical government office real estate that DOGE intends to reduce. InvestingPro analysis shows the company maintains a FAIR financial health score, with revenue growing at 5.25% over the last twelve months.

The firm believes that the growth potential of Easterly Government Properties is not fully appreciated at its current market multiple. Jefferies expects that as the market begins to recognize the company’s growth profile, it will contribute to a re-rating of the stock.

The coverage initiation by Jefferies comes with the expectation that Easterly Government Properties will overcome its recent earnings growth challenges. The analyst’s statement suggests confidence in the company’s ability to distinguish itself from the typical government office real estate and to realize its growth potential, leading to an anticipated improvement in its stock valuation.

In other recent news, Easterly Government Properties reported its fourth-quarter 2024 earnings, revealing a net income per share of $0.05, which fell short of the forecasted $0.06. The company’s revenue also came in below expectations at $74.14 million, compared to the anticipated $77.44 million. Despite these misses, the company achieved a 3% year-over-year growth in core funds from operations (FFO) per share for the quarter. Easterly Government Properties has outlined its plans for 2025, projecting core FFO per share between $1.18 and $1.21, indicating potential growth of up to 3%. The company also plans to invest $100 million in acquisitions and $25-$75 million in growth and development initiatives. Furthermore, Easterly closed 10 new assets in 2024 and aims to expand its portfolio with significant acquisitions next year. Analysts have shown interest in the company’s acquisition pipeline and capital strategy, with executives emphasizing their focus on mission-critical facilities. The company’s strategic direction and future growth potential have been positively received by investors, despite the earnings miss.

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