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BMO cuts CAPREIT target to Cdn$54, keeps Outperform rating

Published 12/11/2024, 05:48 am
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On Monday, BMO Capital Markets adjusted its outlook for CAPREIT, a leading Canadian real estate investment trust. The firm lowered the price target on CAPREIT (CAR-U:CN) (OTC: CDPYF) to Cdn$54.00 from the previous Cdn$56.00, while maintaining an Outperform rating on the stock.

The revision follows the company's third quarter results for 2024, which the analyst noted were consistent with BMO's forecasts. The discussion during the earnings call was deemed positive by the analyst. Although CAPREIT management did not provide specific single-property revenue guidance for 2025, they expressed optimism regarding the potential for increased turnover stimulated by a softening in market rents.

BMO highlighted that a considerable amount of capital is expected to be repatriated from CAPREIT's ancillary businesses soon. This move is seen as potentially paving the way for unit buybacks, an action that could be favorable for shareholders.

The firm's decision to reduce the price target by $2 to Cdn$54 was attributed to a heightened level of uncertainty regarding the company's fundamental outlook for the next year. Despite this adjustment, the firm reiterated its Outperform rating, suggesting confidence in the company's performance prospects.

In other recent news, CAPREIT's financial outlook has been adjusted by BMO Capital Markets, which raised the real estate investment trust's price target to Cdn$61.00 from Cdn$57.00, while maintaining an Outperform rating. This follows CAPREIT's announcement of a significant asset sale in Europe amounting to €748 million, a strategic shift that will not impact the company's funds from operations (FFO) significantly but will reduce its European investment exposure. BMO Capital's analyst anticipates that this move, which will repatriate approximately $172 million in cash to the company's operations, will simplify CAPREIT's business structure and justify a higher valuation multiple.

In addition to this, CAPREIT has been the subject of recent analyst notes from BMO Capital Markets following the release of its second-quarter results for 2024. The firm highlighted the positive outcomes in the company's portfolio metrics, attributing this to ongoing efforts to streamline operations and upgrade the quality of its holdings.

Furthermore, CAPREIT recently finalized an agreement to sell its Manufactured Housing Community (MHC) portfolio to a TPG Real Estate-controlled entity for Cdn$740 million. BMO Capital noted that this sale, while not having an immediate significant financial impact, is expected to further bolster CAPREIT's initiatives to streamline its operations and enhance its Canadian apartment portfolio.

InvestingPro Insights

To complement BMO Capital Markets' analysis of CAPREIT, recent data from InvestingPro offers additional perspective on the company's financial health and market position. CAPREIT's market capitalization stands at $5.5 billion USD, reflecting its significant presence in the Canadian real estate market. The company's P/E ratio of 21.91 suggests that investors are willing to pay a premium for its earnings, possibly due to its strong market position and growth prospects.

InvestingPro Tips highlight CAPREIT's financial stability and income potential. The company has maintained dividend payments for 27 consecutive years, demonstrating a commitment to shareholder returns that aligns with BMO's positive outlook. This consistent dividend history is particularly relevant given BMO's mention of potential unit buybacks, as it underscores CAPREIT's focus on returning value to investors.

Additionally, CAPREIT's liquid assets exceed short-term obligations, indicating a strong financial position. This liquidity could support the capital repatriation and potential unit buybacks mentioned in BMO's analysis. The company's profitability over the last twelve months, coupled with analysts' predictions of continued profitability, reinforces BMO's Outperform rating despite the lowered price target.

For investors seeking a deeper understanding of CAPREIT's financial metrics and growth potential, InvestingPro offers 7 additional tips, providing a more comprehensive analysis to inform investment decisions.

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

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