UBS sets Getty Realty stock with neutral rating, $32 target

On Friday, UBS analyst Michael Goldsmith initiated coverage on Getty Realty (NYSE: GTY), a Triple Net Lease Real Estate Investment Trust (REIT), with a Neutral rating and a price target of $32.00. According to InvestingPro data, Getty Realty maintains a GOOD financial health score and boasts impressive gross profit margins of 93%. The company has shown consistent profitability, with revenue growing 9.4% over the last twelve months. Goldsmith’s position reflects a mix of confidence and caution regarding the company’s various segments and future growth prospects.

The analysis by UBS highlights Getty Realty’s robust Convenience Store segment, which accounts for 64% of the company’s Annual Base Rent (ABR), as a stable foundation for the business. However, concerns were raised about the Car Wash portfolio, which makes up 21% of ABR. The segment has faced challenges due to increased competition and the impact of Zips Car Wash’s bankruptcy, which could potentially affect Getty Realty’s narrative and financial flexibility in the intermediate term. Despite these challenges, InvestingPro analysis reveals the company maintains strong liquidity with a current ratio of 1.96, indicating its ability to meet short-term obligations.

Goldsmith’s report suggests that these issues could restrict Getty Realty’s cost of capital and limit its ability to grow externally. Despite this, UBS anticipates a slight acceleration in acquisitions for 2025, estimating $232 million in acquisitions by UBS compared to a consensus of $235 million and $209 million in 2024.

The report also details Getty Realty’s financial position, noting unsettled forward equity of $165 million, cash on hand of $10 million, and expected disposition proceeds of $7 million. This would provide sufficient funds to cover over half of the company’s 2024 acquisition volume without the need to raise additional capital. However, the estimated 7.6% implied capitalization rate is contrasted with acquisition cap rates in the high-7% range, which could indicate some challenges ahead.

Finally, UBS’s analysis points out that Getty Realty’s shares are currently trading at a 2% premium compared to other Triple Net Lease REITs, based on a five-year average of 4%. The stock currently trades at a P/E ratio of 24.3 and offers an attractive dividend yield of 6.15%, having maintained dividend payments for 31 consecutive years. According to InvestingPro, which provides comprehensive analysis of over 1,400 US stocks, the company appears slightly overvalued at current levels. This assessment aligns with UBS’s conclusion that the risk/reward profile for Getty Realty is balanced, justifying the Neutral rating and the $32.00 price target.

In other recent news, Getty Realty Corp (NYSE:GTY). announced its 2024 performance and set its 2025 earnings guidance. The company invested approximately $209 million in real estate assets last year, achieving an 8.3% initial cash yield, and raised around $289 million in new equity and debt capital. Looking forward, Getty Realty has provided 2025 Adjusted Funds From Operations (AFFO) guidance in the range of $2.40 to $2.42 per diluted share. RBC Capital Markets adjusted its outlook on Getty Realty, reducing the price target to $32 from $33, while maintaining a Sector Perform rating. The firm noted that the company’s fourth-quarter 2024 investment activity exceeded expectations.

Meanwhile, Getty Images Holdings, Inc. and Shutterstock (NYSE:SSTK), Inc. have agreed to merge in a deal valued at approximately $3.7 billion. The merger aims to combine their content libraries to create a leading visual content company. The combined entity is expected to generate revenues between $1.979 and $1.993 billion, with EBITDA projected between $569 million and $574 million. The merger has received unanimous approval from both companies’ Boards of Directors and awaits regulatory and shareholder approvals.

JMP analysts maintained a Market Outperform rating for Getty Realty, highlighting the company’s diversification efforts and strong financial health. The analysts noted Getty Realty’s continued progress in diversifying its revenue streams and a noteworthy dividend track record. Getty Realty’s dividend yield stands at 6.1%, which is about 50 basis points higher than its net-lease REIT peers.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.