Janney maintained its Buy rating and $53 fair value estimate on Agree Realty Corporation ADC as it expects the company to maintain its strong growth profile.
“We continue to expect above average earnings and dividend growth over the next few years, and combined with an attractive valuation, ADC remains one of our favorite names,” analyst Robert Stevenson wrote in a note.
Stevenson expects Agree to continue delivering one of the strongest earnings growth rates in the retail-focused triple-net REIT space given management expecting to acquire $250 million plus of assets at cap rates in the 7.5-8.0 percent range, coupled with a modest level of internal growth.
“While still a small part of the current growth story, we expect ADC to expand its development and partner capital solutions businesses in coming years,” Stevenson noted.
In addition, the analyst expects greater diversification to come via both the disposition of selected Walgreens/pharmacy assets, and the acquisition of new assets.
“We believe that with continued strong earnings growth, a more diverse tenant base, a long history of dividend increases, and a BBB investment grade debt rating, ADC will be able to further close the valuation gap relative to industry leaders NNN and O,” Stevenson added.
The analyst noted that Agree is attractive at current levels based on a 5.3 percent implied cap rate, a 4.1 percent dividend yield, and 2017 FFO and AFFO multiples of 17.0x and 17.1x, respectively.
At time of writing, shares of Agree Realty rose 1.17 percent to $47.37.
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