3 REITs With Analyst Price Targets Well Above Present Price

Although stock market analysts are not infallible, many investors rely on their ratings and price targets when making decisions about stocks to purchase. This is especially observable on the day when an analyst's rating comes out, as share prices tend to rise or fall significantly from upgrades, downgrades or changes in price targets.

Every so often a market will over-correct to an extreme, leaving the price of certain stocks well below recent analysts' price targets. This creates a favorable situation for investors to capitalize on the price disparity.

Take a look at three real estate investment trusts (REITs) that are well below recent analysts' price targets and could be potential winners from present levels.

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Outfront Media Inc. OUT is a New York-based specialty REIT with 500,000 advertising displays across 70 U.S. markets. The ad displays include billboard, digital, transit and mobile assets to showcase its clients. Outfront Media's website claims that its media reaches 70% of all Americans every week. Outfront and Lamar Advertising Co. LAMR are the only specialty REITs that exclusively own advertising space.

On Oct. 9, Morgan Stanley analyst Benjamin Swinburne maintained an Equal-Weight rating on Outfront Media and lowered the price target from $15 to $12. But even with the price target cut, the recent closing price of $8.61 still represents a potential 39.3% of appreciation. JP Morgan also has a recent $12 price target on Outfront Media.

Outfront Media pays a quarterly dividend of $0.30 per share and the annual dividend of $1.20 per share, which not long ago was below 6%, has now climbed to 13.93%.  

The annual dividend is well above the forward funds from operations (FFO) of $0.84, so it would not be surprising to see a dividend cut if earnings don't improve. Investors may want to wait for the next dividend announcement before making a purchase.

Third-quarter earnings will be announced on Nov. 1.

Hudson Pacific Properties Inc. HPP is a Los Angeles-based office REIT with 50 office properties and four motion picture studios. The REIT focuses on centers of innovation for media and tech companies in California, Washington and Vancouver, British Columbia.

Hudson Pacific Properties was founded in 2006 by Chairman and CEO Victor Coleman. Hudson Pacific Properties went public in 2010 and recently had a market cap of $1.04 billion.  

This year has been difficult for Hudson Pacific. In addition to Wall Street's bearish tone on office REITs, Hudson Pacific lost about 20% of its value within a week after the strike of Hollywood actors and writers was announced on May 2.  

On Sept. 7, Hudson Properties surprised Wall Street by announcing it would suspend its quarterly dividend of $0.125, commencing with the third-quarter dividend that was slated to be paid in September. Coleman said the board of directors felt it was the prudent thing to do, given the length of the ongoing strike.

Shares of Hudson Pacific Properties dropped over 7% the morning following the announcement as investors tried to assess whether the dividend suspension would serve a higher purpose in keeping the REIT solvent.

But on Sept. 27, the Writers Guild of America (WGA) ended its strike, and on Oct. 9, the WGA announced that 99% of its members voted to ratify the three-year contract between the WGA and the Alliance of Motion Picture and Television Producers. The Screen Actors Guild is still negotiating with the studios.

On Sept. 26, the day before the strike ended, BTIG analyst Thomas Catherwood upgraded Hudson Pacific Properties from Neutral to Buy and announced an $11 price target. From a recent closing price of $5.96, that represents a huge potential increase of 84.5%. BMO Capital Markets has a recent $10 price target for Hudson Pacific, which would still be a 67.7% increase from its recent price.

Hopefully, the Screen Actors strike will also end soon, reducing the threat of rent noncollection from its Hollywood studio portfolio. That would make Hudson Pacific a solid bargain from its recent price.

Kimco Realty Corp. KIM is a Jericho, New York-based retail REIT that owns and operates 528 open-air, grocery store-anchored and unanchored properties with 90 million square feet of leasable space as well as ground leases. Kimco Realty was founded in 1958, is a member of the S&P 500 and has been publicly traded on the New York Stock Exchange (NYSE) since 1991.

Kimco Realty's lease terms range from less than five years to 30 years or longer. It has over 5,000 different tenants, and only 10 of those tenants have annual base rent (ABR) exposure over 1%, thereby ensuring tenant diversity for Kimco Realty.

On Oct. 3, Kimco Realty OP LLC, a subsidiary of Kimco Realty, priced a public offering of $500 million aggregate principal notes at 6.4%, with an effective yield of 6.456%, maturing March 1, 2034.

On Oct. 8, Stifel analyst Simon Yarmak maintained a Buy rating on Kimco Realty and lowered the price target from $23.25 to $22. From a recent closing price of $16.72, that represents a potential 31.5% upside from present value. On Sept. 20, Wells Fargo analyst Tammi Fique upgraded Kimco Realty from Underweight to Equal-Weight and announced a $20 price target.

Kimco Realty will report its third-quarter earnings on Oct. 26.

Investors should keep in mind that analysts are only correct with ratings and price targets about 50% of the time, so investors should perform their own due diligence before buying or selling any stocks.

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