Truist cuts NexPoint Residential Trust price target to $38

Thursday, Truist Securities adjusted its outlook on NexPoint Residential Trust (NYSE:NXRT) shares, reducing the price target to $38 from the previous $42 while maintaining a Hold rating on the stock. The revision reflects a mix of performance concerns and market conditions, as NexPoint, with a market capitalization of $870 million, stands out as the worst-performing apartment real estate investment trust (REIT) within Truist’s coverage year-to-date. According to InvestingPro data, the company’s current Fair Value assessment suggests the stock is fairly valued at current levels.

Analysts at Truist noted that despite a downward adjustment in the price target, funds from operations (FFO) estimates are being raised. This adjustment partly considers the company’s share repurchases in the second quarter of 2025, with InvestingPro highlighting management’s aggressive share buyback strategy as a key factor. The company’s debt-to-equity ratio of 3.86x and total debt of $1.47 billion underscore NexPoint’s high financial leverage compared to its peers, while the upcoming expiration of a significant number of interest rate swaps in 2026 pose financial risks that are hard to overlook. For deeper insights into NXRT’s financial health and more exclusive ProTips, investors can access the comprehensive Pro Research Report on InvestingPro.

The broader market conditions are also contributing to the more cautious stance on NexPoint. Higher interest rates and labor market uncertainties are impacting REIT stock multiples more broadly. For NexPoint specifically, these issues could present greater risks due to its financial position.

The performance of NexPoint is notably lagging behind other sunbelt apartment stocks, which have been benefiting from a slowdown in new supply in the South. InvestingPro data shows the stock has declined 25.4% over the past six months, with a year-to-date drop of 16.9%, while the Vanguard Real Estate ETF (VNQ), which is often used as a benchmark for the REIT sector, has seen a much smaller decline of 1%. Despite these challenges, the company maintains a healthy dividend yield of 6% and has increased its dividend for 10 consecutive years.

The Truist Securities report emphasizes that while there are positive aspects to NexPoint’s operations, such as the FFO growth, the company’s exposure to interest rate fluctuations and comparative financial leverage are factors that investors should consider. The new price target of $38 reflects these concerns as well as the broader economic headwinds facing the sector.

In other recent news, NexPoint Residential Trust reported its first-quarter earnings for 2025, revealing a net loss of $6.9 million, or $0.27 per diluted share, which was slightly better than the forecasted loss of $0.30 per share. The company’s revenue came in at $63.2 million, marginally below the anticipated $63.35 million. NexPoint exceeded expectations for core funds from operations (FFO), posting $0.75 per share against a consensus estimate of $0.65 per share. Following this performance, the company raised its full-year 2025 core FFO guidance, moving the midpoint from $1.70 to $1.75 per share.

Despite these positive earnings results, Citizens JMP downgraded NexPoint from Market Outperform to Market Perform due to concerns about the company’s balance sheet risk and high leverage. The analysts noted that NexPoint’s interest rates have been kept low due to swaps scheduled to expire in the coming years, potentially leading to a significant earnings deterioration if market conditions remain unchanged. NexPoint also announced a new share buyback program and entered a $100 million interest rate swap at 3.489%, signaling its commitment to enhancing shareholder value.

The company’s stock experienced a notable increase following the earnings release, reflecting investor confidence in its strategic initiatives and ability to manage costs effectively.

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