Kimco stock downgrade by Mizuho as shares hit target, growth prospects seen elsewhere

On Monday, Kimco Realty Corp (NYSE:KIM) stock was downgraded by Mizuho from Outperform to Neutral, although the firm raised its price target to $23.00 from $20.00. The real estate investment trust, which specializes in shopping center properties, has reached the previous price target set by Mizuho, showing a 15% increase in the third quarter of 2024.

The decision to downgrade comes as Kimco's stock now trades in line with its peers, at approximately 18-19 times its adjusted funds from operations (AFFO) and a low-6% interest coverage ratio (ICR). Despite this alignment, Mizuho notes that Kimco shows less relative growth in AFFO per share expected for 2025 compared to its subsector.

Mizuho sees a more favorable risk-adjusted growth potential in Regency Centers Corporation (NASDAQ:REG), citing its better value, anticipated growth into 2025, exposure to grocery-anchored shopping centers, and favorable portfolio demographics.

The firm acknowledges a potential near-term risk to its rating downgrade. There's a chance that generalist investors, drawn by lower interest rates, may prefer larger and more liquid real estate investment trusts (REITs) such as Kimco. This investor behavior could support Kimco's stock performance despite the downgrade.

The revised price target of $23.00 reflects the firm's assessment of Kimco's current valuation, even as it signals a more cautious outlook on the stock's growth prospects relative to its peers.

InvestingPro Insights

Amidst Mizuho's recent downgrade of Kimco Realty Corp (NYSE:KIM), a glance at real-time data and InvestingPro Tips reveals a nuanced picture. With a market capitalization of $15.03 billion and a price-to-earnings (P/E) ratio of 42.32, Kimco is trading at a high earnings multiple, which is echoed by the adjusted P/E for the last twelve months as of Q2 2024, standing at 42.01. This high multiple could be a factor in Mizuho's assessment of the stock's valuation.

However, Kimco's commitment to shareholder returns is evident as it has not only maintained but also raised its dividend payments for 33 consecutive years, with a dividend yield of 4.31% as of the latest data. This consistent performance, coupled with a strong return over the last three months, which saw a 17.43% price total return, may attract investors looking for stability and consistent income.

InvestingPro Tips further indicate that Kimco's liquid assets exceed its short-term obligations, suggesting financial resilience. Additionally, the company's stock is trading near its 52-week high, at 97.59% of this peak, which could signal market confidence. For readers interested in deeper analysis, there are additional InvestingPro Tips available that delve into Kimco's financial health and market performance.

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