On Tuesday, Wedbush made an adjustment to its view on Healthcare Realty (NYSE:HR) Trust, a company listed on the New York Stock Exchange under the ticker NYSE:HR. The stock was downgraded from Outperform to Neutral, and the price target was lowered to $15.00 from the previous $19.00. The downgrade comes after the company's recent performance updates and market reactions.
The firm's analyst noted that despite Healthcare Realty Trust 's expectation of its multi-tenant portfolio same store net operating income (NOI) increasing from mid-2% as of the third quarter of 2023 to approximately 5% by the end of this year, there have been some concerns. The anticipated growth is primarily driven by occupancy rates, but recent asset sales and one development have caused a slight decrease in occupancy, which affected the forecast.
The company's leverage and dividend sustainability have been under scrutiny, and the recent need to modify the NOI bridge in its first update has not been well-received by investors. The market's confidence was further shaken when tenant retention rates for the fourth quarter of 2023 did not meet the target of 80%, a miss that was also seen in the third quarter of the same year.
The analyst believes that the market is looking for consistent progress across all aspects of the company's operations to counteract the negative sentiment that is building up. Healthcare Realty Trust's stock experienced an 8% decline last Friday following minor downward adjustments, indicating a low tolerance for any deviations from expected performance.
The revised price target is based on a multiple of 13 times the adjusted funds from operations (AFFO), which is a step back to the valuation multiple applied when coverage of the stock was initiated in October 2023. This adjustment reflects the analyst's recalibrated expectations for the company's financial outlook.
InvestingPro Insights
Healthcare Realty Trust (NYSE:HR) has been navigating a challenging market environment, reflected in the recent actions by Wedbush. To provide a broader context, InvestingPro data indicates that the company has a market capitalization of $5.53 billion. Despite a notable revenue growth of 44.01% in the last twelve months as of Q4 2023, the company's stock performance has been under pressure, with a 1-month price total return of -15.43%. This aligns with the bearish sentiment expressed by the analyst.
Investors are also looking at the dividend yield, which stands at an attractive 8.64%, pointing to the company's commitment to returning value to shareholders. This is supported by one of the InvestingPro Tips that highlights Healthcare Realty Trust's impressive track record of maintaining dividend payments for 32 consecutive years. However, it's important to note that analysts are concerned about the company's short-term liquidity, as current obligations exceed liquid assets. This could be a factor in the cautious stance by Wedbush.
For those looking to delve deeper into Healthcare Realty Trust's financials and future prospects, InvestingPro offers additional insights and metrics. There are more InvestingPro Tips available that can help investors make informed decisions. To access these tips, consider subscribing to InvestingPro and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.