Analyst Upgrades Camden Property Trust: Anticipating A 'Mean-Revert' And Strong FFO Growth

BMO Capital Markets analyst John P. Kim upgraded Camden Property Trust CPT to Outperform from Market Perform at an increased price target of $126 (from $125).

The analyst believes CPT shares have underperformed peers (+0.8% vs. +12.6%) and expects it to 'mean-revert' in the near term. 

The analyst is bullish on CPT's strong balance sheet (4.3x Net Debt / EBITDA) and expects it to witness slightly better FFO per share growth (+3.7% vs +3.4% for the Apartment REIT sector) in 2024.

Kim projects CPT to outperform in the near term and anticipates a guidance raise from a stronger employment background and lower-than-expected supply-related pressures.

The analyst notes consensus expectation of 2023 Core FFO per share of $6.88 and same-store revenue growth of 5.7%, partly aided by lower-than-expected pressure on rents from the incoming supply.

Kim is pleased with CPT's high exposure to class A assets at 37.5% (as per CoStar) among Sunbelt peers, driving above-average leasing spreads on increased demand.

Also, the analyst sees supply across the top 12 Sunbelt markets increasing by +4.5% in FY23 and stabilizing vacancy rates to reach a +270bps delta to Coastal markets.

Kim raised estimates for revenue and FFO per share to $1.537 billion (from $1.534 billion) and $6.88 (from $6.85) for 2023, and $1.586 billion (from $1.583 billion) and $7.14 (from $7.10), respectively, for 2024.

Also Read: U.S. Apartment Values' Will Plunge A Further 20%,' Economists Say, But Wall Street Still Sees Major Upside In These REITs — Be Greedy When Others Are Fearful?

Price Action: CPT shares are trading lower by 0.53% at $110.16 on the last check Tuesday.