Veris Residential stock rating cut to In Line by Evercore ISI

On Wednesday, Evercore ISI adjusted its stance on Veris Residential (NYSE: VRE), downgrading the stock from Outperform to In Line and reducing the price target to $18.00 from the previous $20.00. Currently trading at $16.20, InvestingPro analysis suggests the stock is overvalued relative to its Fair Value. The revision comes after a careful review of the company’s fourth-quarter results and future financial guidance, with the company showing a revenue growth of 4.4% in the last twelve months.

The downgrade reflects concerns about the company’s strategic direction in a challenging capital market environment. While InvestingPro data shows the company maintains strong liquidity with a current ratio of 1.22 and liquid assets exceeding short-term obligations, Veris Residential acknowledged the difficulty of a full monetization event. The company opted instead for a tactical asset sale strategy, including selling portions of its land bank and certain operating assets, aiming to raise between $300 million and $500 million. The company is also implementing a $100 million buyback program, supporting its high shareholder yield.

Evercore ISI had initially upgraded Veris Residential with the expectation that the Federal Reserve’s easing cycle would stimulate the transaction market and enable the company to fully capitalize on its apartment platform. However, the anticipated large-scale deal seems unlikely in the near term. Despite Veris Residential’s solid operating platform and better-than-expected same-store (SS) results over the past few years, analysts at Evercore ISI do not foresee the stock significantly outperforming its peers or the RMZ in the next 12 months due to the delay in the full monetization process.

The report praised the management’s efforts to build a strong operating platform and initiatives to bridge the valuation gap. Nevertheless, these measures are not expected to sufficiently drive stock performance. The revised price target is informed by a new blended valuation approach and updated net operating income (NOI) forecasts for 2025 and 2026, along with internal rate of return (IRR) calculations.

In light of the fourth-quarter outcomes and revised projections, Evercore ISI has increased its core funds from operations (FFO) estimate for 2025 from $0.57 to $0.62, and for 2026 from $0.62 to $0.69, primarily due to low capitalization rate disposals used to reduce the line of credit balance. InvestingPro analysis reveals additional insights, including expectations for net income growth this year, despite current trading at high EBIT and EBITDA multiples. Get access to the comprehensive Pro Research Report and 6 more exclusive ProTips for deeper analysis of Veris Residential’s financial health and growth prospects. Despite this earnings enhancement, the price target has been adjusted downward to reflect the new valuation methodology and the less certain prospects of a larger monetization event.

In other recent news, Veris Residential Inc. reported a net loss of $0.13 per share for the fourth quarter of 2024, which slightly missed analysts’ expectations of a $0.11 loss. However, the company exceeded revenue forecasts, reporting $68.08 million compared to the anticipated $67.36 million. Despite the earnings miss, Veris Residential’s revenue growth was a positive highlight for investors. The company plans to sell $300-$500 million in assets over the next 12-24 months and may buy back up to $100 million in stock, reflecting strategic initiatives to enhance shareholder value. Additionally, Veris Residential provided guidance for 2025, projecting Core Funds From Operations (FFO) of $0.61 to $0.63 per share. The firm anticipates same-store NOI growth of 1.7-2.7% and revenue growth of 2.1-2.7%. Analysts from Evercore ISI and BTIG have shown interest in the company’s strategic asset sales and stock buyback plans. These recent developments indicate Veris Residential’s focus on optimizing its portfolio and leveraging market opportunities.

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