Wells Fargo has adjusted their price target for KKR Real Estate Finance (KREF, Financial), reducing it from $14 to $11 following the company's first-quarter results. Despite the lowered target, the financial services firm continues to maintain an Overweight rating on KREF shares.
A significant factor in this decision was the downgrade of credit ratings for two of KREF's loans, one of which involves a life science property located in Boston. This credit migration contributed to a decrease in the book value by 2% compared to the previous quarter. Additionally, the firm highlighted the ongoing challenges in the life sciences sector as a critical area to monitor moving forward.
Wells Fargo expressed that these developments, particularly the credit migration, presented challenges for the quarter, yet it still sees potential in KREF's stock performance overall.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 4 analysts, the average target price for KKR Real Estate Finance Trust Inc (KREF, Financial) is $12.44 with a high estimate of $14.00 and a low estimate of $10.75. The average target implies an upside of 36.15% from the current price of $9.14. More detailed estimate data can be found on the KKR Real Estate Finance Trust Inc (KREF) Forecast page.
Based on the consensus recommendation from 5 brokerage firms, KKR Real Estate Finance Trust Inc's (KREF, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for KKR Real Estate Finance Trust Inc (KREF, Financial) in one year is $10.04, suggesting a upside of 9.91% from the current price of $9.135. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the KKR Real Estate Finance Trust Inc (KREF) Summary page.
KREF Key Business Developments
Release Date: February 04, 2025
- GAAP Net Income: $14.6 million or $0.21 per share.
- Book Value: $14.76 per share as of December 31, 2024.
- Distributable Loss: Negative $14.7 million or negative $0.21 per share.
- Dividend: $0.25 per share, yielding 10%.
- Liquidity: $685 million available at the end of the fourth quarter.
- Fourth Quarter Repayments: Exceeded $450 million.
- Full Year Repayments: $1.5 billion, approximately 19% of the portfolio.
- Watch List Loans: 8% of the loan portfolio, down from 13% a year ago.
- Debt to Equity Ratio: 1.6 times.
- Total Leverage Ratio: 3.6 times.
- Share Repurchase: $10 million of KREF stock repurchased at an average price of $11.64.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KKR Real Estate Finance Trust Inc (KREF, Financial) reported a GAAP net income of $14.6 million for the fourth quarter of 2024.
- The company has decreased its watch list percentage from 13% in Q4 2023 to 8% in Q4 2024, indicating improved asset management.
- KREF has a strong liquidity position with $685 million available at the end of the fourth quarter.
- The company successfully closed two loans totaling $225 million in January 2025, indicating a robust pipeline.
- KREF's liability structure is a differentiator, with 79% of its financing being non-mark to market, providing stability in volatile markets.
Negative Points
- KREF reported a distributable loss of $14.7 million for the fourth quarter of 2024.
- The company anticipates further credit migration, indicating potential future challenges in the portfolio.
- There are still four watch list loans in the portfolio, representing 8% of the loan portfolio.
- The higher U.S. Treasury market may dampen some acquisition activity, potentially impacting future growth.
- KREF's debt to equity ratio is 1.6 times, and total leverage ratio is 3.6 times, which may limit flexibility in financial maneuvering.
