On Monday, Evercore ISI adjusted its price target for CubeSmart (NYSE:CUBE), a self-storage real estate company, increasing it to $45.00 from the previous $43.00. The firm maintained its "In Line" rating for the stock. The revision follows CubeSmart's recent earnings report, which revealed a higher than anticipated quarterly performance.
CubeSmart's fourth-quarter funds from operations (FFO) reached $0.70 per share, surpassing both the consensus estimate of $0.68 and Evercore ISI's projection of $0.67. The company also reported a net operating income (NOI) growth of 1.2% for the quarter, which exceeded Evercore ISI's estimate of a 2.6% decline. This growth was attributed to revenue increasing by 0.4%, against a forecasted 0.5% decline, and expenses decreasing by 1.8%, compared to an expected increase of 5.5%.
The decrease in overall expenses was significantly influenced by a 13.5% reduction in property taxes, which constitute 35% of CubeSmart's total operating expenses. However, this decrease is expected to present a challenge for 2024 due to anticipated higher expense growth.
In response to these results, Evercore ISI updated its model, leading to a slight improvement in the same-store revenue growth forecast for fiscal year 2024, from -1.3% to -0.7%. Despite this, the firm slightly lowered its core FFO estimate for 2024 from $2.62 to $2.61, factoring in increased assumptions around expenses. Conversely, the core FFO estimate for fiscal year 2025 was adjusted upward by $0.05, from $2.77 to $2.82, after revisions to general and administrative expenses and acquisition assumptions.
Additionally, Evercore ISI made adjustments to its discounted cash flow (DCF) perpetual growth rate assumption, increasing it to 2.5%, and lowered its targeted unlevered internal rate of return (IRR) to 7.7%, while applying a 5.65% capitalization rate to CubeSmart's portfolio. These valuation revisions underpin the firm's decision to raise the price target for CubeSmart's shares.
InvestingPro Insights
CubeSmart (NYSE:CUBE) has demonstrated resilience in its financial performance, as indicated by the recent positive adjustments in Evercore ISI's price target. To further inform investors, here are some notable metrics and insights from InvestingPro:
The company holds a market capitalization of $9.81 billion, reflecting its substantial presence in the self-storage real estate sector. CubeSmart's P/E ratio stands at 23.96, which, when considered alongside its near-term earnings growth, suggests the stock is trading at a low P/E ratio relative to its potential earnings expansion. This aligns with an InvestingPro Tip highlighting the company's attractive valuation in terms of earnings.
InvestingPro data also reveals a dividend yield of 4.68%, showcasing CubeSmart's commitment to returning value to shareholders. This is further substantiated by the company's impressive track record of raising its dividend for 13 consecutive years, a testament to its financial stability and investor-friendly approach.
On the profitability front, CubeSmart has been profitable over the last twelve months, which is a reassuring signal for investors. Moreover, analysts predict the company will maintain profitability this year, which could inspire confidence in CubeSmart's future financial health.
Investors interested in a deeper dive into CubeSmart's financials and future outlook can explore additional InvestingPro Tips on https://www.investing.com/pro/CUBE. There are more tips available that could provide valuable insights, including the company's ability to manage short-term obligations and its performance over the last decade. To access these insights and more, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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