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On Tuesday, Keefe, Bruyette & Woods adjusted its price target for Arbor Realty Trust (NYSE:ABR) shares, bringing it down to $11.00 from the previous $11.75, while the Market Perform rating for the stock was maintained. The revision follows the company’s first quarter performance and reflects a slight decrease in earnings projections.
Analysts at Keefe, Bruyette & Woods have revised their earnings estimates for Arbor Realty Trust by 3-5%, aligning with the company’s outlook for 2025. The adjustment accounts for increased real estate owned (REO) expenses and a modest decline in loan originations. Despite these challenges, Arbor Realty Trust has secured a new $1.15 billion repurchase facility and expanded an existing facility by $200 million.
Arbor Realty Trust faces ongoing credit challenges, as highlighted by the firm’s report. The company has substandard or doubtful loans totaling $1.2 billion, which represents 10.75% of its assets. Non-performing loans (NPLs) stand at $511 million, or 4.45% of assets, and REO is at $302 million, equating to 2.26% of assets. These figures underscore the credit-related difficulties that the company is currently dealing with.
The stock is currently trading at 0.91 times its tangible book value, which is reported to be $11.59. Arbor Realty Trust also has an attractive dividend yield of 11.4%. However, due to the uncertainty surrounding its credit situation, Keefe, Bruyette & Woods has opted to maintain a Market Perform rating on the stock.
The firm’s decision to adjust the price target is based on these financial considerations, as stated by the analyst: "Post-1Q Reduce EPS on Credit, Originations; Post-1Q25, we reduce estimates by 3-5%, consistent with ABR’s 2025 outlook. Our reduced estimates are driven by REO expense and modestly lower originations. While ABR successfully entered into a new $1.15bn repurchase facility and increased another facility by $200mm, credit challenges remain ongoing with substandard/doubtful loans of $1.2bn (10.75%), NPLs of $511mm (4.45%), and REO of $302mm (2.26% of assets). ABR trades at 0.91x tangible book value of $11.59 and a dividend yield of 11.4%. Given credit uncertainty, we maintain a Market Perform rating. Adjusting price target."
In other recent news, Arbor Realty Trust reported first-quarter earnings that did not meet analyst expectations. The company posted adjusted earnings per share of $0.16, falling short of the consensus estimate of $0.29 by $0.13. Despite this earnings miss, Arbor Realty Trust’s revenue exceeded expectations, coming in at $134.16 million compared to the anticipated $104.55 million. However, this figure represents a 14.6% decline from the same period last year. The firm declared a quarterly cash dividend of $0.30 per common share and noted distributable earnings of $0.28 per diluted share, or $0.31 excluding certain realized losses. Arbor Realty Trust also highlighted a new $1.15 billion repurchase facility aimed at enhancing its leverage and liquidity. The company’s agency loan originations dropped to $605.9 million from $1.38 billion in the previous year, while its structured loan portfolio grew to $11.49 billion. Arbor Realty Trust foreclosed on seven non-performing loans totaling $196.7 million during the quarter.
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