Phillips Edison & Company (PECO, Financial) announced a robust financial performance for the first quarter, with revenue hitting $178.31 million. This result exceeded analysts' expectations, which had forecasted $174.23 million. The company's strong quarterly results were attributed to heightened retailer demand and notable value generation within its grocery-anchored shopping center portfolio.
The company reported a 3.9% increase in same-center net operating income (NOI), showcasing the robustness and reliability of its cash flows. This growth is underpinned by their centers being anchored by the top two grocers in the market, bolstering earnings stability and offering promising growth opportunities. Furthermore, 71% of PECO's rental income comes from tenants providing necessity-based goods and services, affirming its strategic advantage.
PECO's focused strategy and disciplined approach are central to its preparedness for continued growth, even amidst evolving economic conditions. This strategic positioning ensures that the company remains competitive and poised for sustainable success.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 9 analysts, the average target price for Phillips Edison & Co Inc (PECO, Financial) is $40.22 with a high estimate of $46.00 and a low estimate of $36.00. The average target implies an upside of 14.20% from the current price of $35.22. More detailed estimate data can be found on the Phillips Edison & Co Inc (PECO) Forecast page.
Based on the consensus recommendation from 11 brokerage firms, Phillips Edison & Co Inc's (PECO, Financial) average brokerage recommendation is currently 2.4, 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 Phillips Edison & Co Inc (PECO, Financial) in one year is $39.09, suggesting a upside of 10.99% from the current price of $35.22. 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 Phillips Edison & Co Inc (PECO) Summary page.
PECO Key Business Developments
Release Date: February 07, 2025
- Core FFO per Share Growth: Nearly 4% in 2024, potentially 6% if adjusted for interest rates.
- Acquisitions: Closed nearly $100 million in Q4; targeting $350 million to $450 million in 2025.
- Comparable New Rent Spreads: 30.2% in Q4.
- Comparable Renewal Rent Spreads: 20.8% in Q4.
- Portfolio Occupancy: 98% leased at the end of Q4.
- NAREIT FFO: $83.8 million or $0.61 per diluted share in Q4, 8.9% YoY growth.
- Core FFO: $85.8 million or $0.62 per diluted share in Q4, 6.9% YoY growth.
- Same-Center NOI Growth: 6.5% in Q4.
- Liquidity: Approximately $948 million as of December 31, 2024.
- Net Debt to Adjusted EBITDAR: 5 times.
- 2025 Guidance for NAREIT FFO: $2.47 to $2.54 per share, 5.7% increase over 2024 at midpoint.
- 2025 Guidance for Core FFO: $2.52 to $2.59 per share, 5.1% increase over 2024 at midpoint.
- 2025 Same-Center NOI Growth Guidance: 3% to 3.5%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Phillips Edison & Co Inc (PECO, Financial) delivered solid core FFO per share growth of nearly 4% in 2024, despite significant interest expense headwinds.
- Retailer demand across PECO's portfolio remains strong, evidenced by high occupancy rates and strong rent spreads.
- PECO exceeded the high end of its original guidance for acquisitions in 2024, closing nearly $100 million in acquisitions in the fourth quarter.
- The company has a high-quality portfolio capable of delivering strong cash flow growth, with approximately 70% of ABR coming from necessity-based goods and services.
- PECO's low leverage provides financial capacity to meet growth targets, with diverse sources of capital including additional debt issuance, dispositions, and equity.
Negative Points
- Significant interest expense headwinds impacted core FFO per share growth, which would have been higher without these expenses.
- Several retailers, including Party City and Big Lots, filed for bankruptcy, although PECO has low exposure to these retailers.
- The transaction market is competitive, with more buyers putting pressure on pricing, which could impact acquisition opportunities.
- PECO's strategy of taking back weaker stores to improve merchandising may temporarily put downward pressure on occupancy and retention rates.
- The company faces potential headwinds from tariffs and higher labor costs, which could impact retailer operations and consumer spending.
