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On Wednesday, Scotiabank (TSX:BNS) analyst Nicholas Yulico increased the price target for W. P. Carey & Co. (NYSE:WPC) shares to $63.00, up from the previous target of $59.00. The firm continues to hold a Sector Perform rating on the stock. Yulico attributed the adjustment to a more optimistic outlook on the company’s earnings growth following its fourth-quarter results for 2024.
The analyst noted that the fourth-quarter performance provided clearer insights into W. P. Carey’s earnings growth potential. The company’s impressive 92.35% gross profit margin and GREAT financial health score from InvestingPro support this positive outlook. This has led to a revised valuation multiple that is more aligned with the Net Lease subsector. The 2025 estimated price to adjusted funds from operations (P/AFFO) multiple has been raised to 13.0 times, up from 12.0 times, which is close to the weighted average of approximately 13.5 times for the Net Lease subsector.
Yulico highlighted that a significant factor influencing W. P. Carey’s stock over the next two years would be the company’s strategy to recycle its Operating Self-Storage portfolio, which is estimated to be worth around $840 million. This move is expected to contribute to year-over-year adjusted funds from operations (AFFO) growth of 3.8% in 2025 and 2.3% in 2026, as well as provide a roughly 1% increase in net asset value (NAV).
Despite the recent underperformance in the Self-Storage subsector, Scotiabank views the management’s decision to divest these assets as a sound strategy. With a 27-year track record of consistent dividend payments and strong liquidity metrics, WPC has demonstrated reliable financial management. Nevertheless, the firm is adopting a wait-and-see approach regarding W. P. Carey’s stock, expressing a need for the company to demonstrate its capacity for effective capital deployment, particularly in light of the recent improvements in the cost of equity. For deeper insights into WPC’s valuation and financial health metrics, investors can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, W. P. Carey & Co. reported mixed financial results for the fourth quarter of 2024. The company’s earnings per share (EPS) came in at $0.21, falling short of the forecasted $0.54. However, W. P. Carey’s revenue exceeded expectations, reaching $403.65 million compared to the anticipated $385.18 million. Analysts at BMO Capital Markets upgraded W. P. Carey’s stock rating from Market Perform to Outperform, setting a new price target of $67, reflecting confidence in the company’s strategic divestments and growth prospects. Meanwhile, Evercore ISI raised its price target for W. P. Carey to $64 while maintaining an In-Line rating, noting the company’s strong investment activities in the fourth quarter.
W. P. Carey concluded 2024 with total investments of $1.6 billion, surpassing its guidance. The company has outlined its 2025 investment guidance between $1 billion and $1.5 billion, indicating plans to capitalize on its $2.6 billion liquidity. The firm also highlighted the benefits of its CPI-linked leases, which serve as a hedge against inflation. Additionally, W. P. Carey plans to focus on expanding its presence in U.S. retail and data centers, having exited the office sector as part of its strategic shift. The company’s dividend yield, well-covered at 6.0%, remains an attractive feature for investors.
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