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On Monday, Piper Sandler adjusted its stance on EastGroup Properties (NYSE:EGP), an industrial REIT with a market capitalization of $8.3 billion, downgrading the stock from Overweight to Neutral and reducing the price target to $175 from the previous $218. The change in rating follows a significant market shift after the introduction of new tariffs on April 2, which impacted industrial stocks. According to InvestingPro analysis, EGP currently appears slightly overvalued, with a "GREAT" overall financial health score.
According to Piper Sandler, industrial stocks have experienced a notable decline since the tariffs were announced, falling 12% compared to a decrease of 8% in the overall REIT sector. Prior to the tariff announcement, industrial stocks had been outperforming year-to-date, with a 5% gain against a 1% increase for REITs. Specifically, EastGroup Properties had seen a 9% rise before April 2 but has since dropped by 9%. InvestingPro data shows the stock’s RSI indicates oversold conditions, with the stock now trading 16% below its 52-week high of $192.61.
The firm highlighted that EastGroup Properties and Terreno Realty (NYSE:TRNO), with their focus on infill multi-tenant properties, might fare better than those invested in global and big box industrial spaces, which are expected to be harder hit. Despite this potential resilience, Piper Sandler’s downgrade reflects a market reassessment of the outlook for these companies in light of the recent tariff-related disruptions.
The analyst from Piper Sandler commented on the situation, stating, "The positive is that global and big box industrial is likely to be harder hit than EGP’s and TRNO’s infill multi-tenant properties." However, they also noted that barring a complete reversal of the tariff policy by the Trump administration, the shock from the April 2 tariff announcement is likely to have a lasting effect on warehouse tenants as they reevaluate their sourcing and pricing strategies.
In other recent news, EastGroup Properties reported its fourth-quarter 2024 earnings, slightly surpassing analysts’ expectations with an earnings per share (EPS) of $1.16, just above the forecasted $1.15. However, the company’s revenue fell short of projections, coming in at $163.77 million compared to the anticipated $166.42 million. Despite the revenue miss, EastGroup’s funds from operations grew by 5.9% in the quarter. The company maintained a strong occupancy rate of 96.1% at the end of the year. Looking ahead, EastGroup plans $300 million in development starts for 2025 and anticipates $15.8 million in incremental net operating income from these projects.
In other developments, Evercore ISI downgraded EastGroup Properties’ stock rating from Outperform to In Line, while slightly increasing the price target to $185 from $181. The downgrade reflects the analysts’ view that the potential for further stock price appreciation appears limited, given the stock’s recent performance. Despite the downgrade, EastGroup’s portfolio continues to attract solid demand with a high occupancy rate of 97%, as noted by Evercore ISI analysts. The company’s strategic plans for 2025 include $150 million in strategic acquisitions and maintaining an average occupancy of 96%.
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