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On Thursday, Lucid (NASDAQ:LCID) Capital Markets adjusted its outlook on Gladstone Commercial (NASDAQ:GOOD) Corporation (NASDAQ: GOOD), reducing the price target from $17.00 to $16.50, while maintaining a Neutral stock rating. The revision follows the release of the company’s fourth-quarter 2024 results. According to InvestingPro data, the company maintains a perfect Piotroski Score of 9, indicating strong financial health, while the stock has delivered an impressive 40% total return over the past year.
Gladstone Commercial, which has a property portfolio of approximately 16.9 million square feet, primarily consisting of single-tenant and anchored multi-tenant net leased industrial and office assets, with additional retail and medical office buildings, issued $75 million in unsecured notes at a fixed rate of 6.47% in late December. The proceeds were used to pay down a floating rate line of credit. This strategic financial move has led analysts at Lucid to revise their expectations for the company’s core funds from operations (FFO) for the year 2025, decreasing the estimate from $1.38 to $1.31 per share due to anticipated higher interest expenses. They also introduced a 2026 core FFO estimate of $1.32 per share. InvestingPro analysis shows the company maintains strong liquidity with a current ratio of 5.64, while generating solid operating margins with a gross profit margin of 79%.
The analysts highlighted concerns regarding the ability of Gladstone Commercial to cover its annual dividend of $1.20 per share. They projected a 100% payout in 2025, suggesting that dividend coverage could be challenged without additional waivers of incentive fees from the company’s Board. It was noted that waiving the estimated incentive fees for 2025 could potentially add approximately $0.07 per share to Gladstone’s earnings. Despite these concerns, InvestingPro data reveals the company has maintained dividend payments for 23 consecutive years, currently offering a substantial 7.47% yield. Get access to more exclusive dividend insights and 8 additional ProTips with an InvestingPro subscription.
The new price target of $16.50 is set just below Lucid’s net asset value (NAV) estimate of $16.63 for Gladstone Commercial, representing 99% of the NAV. This valuation is based on 13 times the estimated adjusted funds from operations (AFFO) for 2025. The firm compared this to Gladstone’s peers with a market capitalization of less than $1 billion, which are currently trading at 78% of NAV and 12 times their estimated 2025 AFFO. The stock currently trades at a P/B ratio of 4.09x and an EV/EBITDA multiple of 15.2x, suggesting it may be slightly overvalued according to InvestingPro’s Fair Value analysis.
In other recent news, Gladstone Commercial Corporation reported its fourth-quarter 2024 earnings, exceeding expectations with earnings per share (EPS) of $0.09 compared to the forecasted $0.06. However, the company’s revenue of $37.45 million slightly missed the anticipated $37.92 million. Despite this revenue shortfall, the company maintained a strong financial position, with a full-year funds from operations (FFO) reaching $1.41 per share. Gladstone Commercial is actively working to increase its industrial portfolio concentration to 70% and plans to reduce leverage, aiming for a lower 40% range. The company intends to sell 4-5 office assets in 2025 as part of its strategic initiatives. Additionally, the company has expressed confidence in its ability to capitalize on industrial acquisitions, supported by more than $98 million in available credit and cash. These developments reflect Gladstone Commercial’s ongoing efforts to enhance its portfolio quality and financial flexibility.
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