Valued at $49.4 billion by market cap, California-based Realty Income Corporation (O) stands as a trusted real estate partner to some of the world’s most renowned companies. Founded in 1969, the company has built an impressive portfolio of over 15,450 diversified commercial properties spanning all 50 U.S. states, the U.K., and six other European nations.
However, shares of this REIT have gained 7.8% over the past year and are in negative territory on a YTD basis, posting a decline of nearly 1.5%, underperforming the broader S&P 500 Index’s ($SPX) 30.4% annual return and 23.1% YTD increase.
Zooming in further, the stock is also lagging behind the Real Estate Select Sector SPDR Fund’s (XLRE) 19.3% return over the past 52 weeks and 7.3% gain on a YTD basis.
Realty Income dropped its Q3 earnings report on Nov. 4, revealing a mixed picture that left investors unimpressed. While the company’s topline figure of $1.3 billion managed to exceed Wall Street forecasts narrowly, the company’s adjusted fund from operations (FFO) of $1.05 per share perfectly aligned with street estimates, overshadowing the revenue beat. The market’s reaction was muted post-Q3 results, with O’s shares remaining virtually flat as the earnings report failed to ignite enthusiasm among investors.
For the current fiscal year, ending in December, analysts expect O’s bottom line to climb 4.8% annually to $4.19 per share. On the other hand, the company’s earnings surprise history is mixed. It beat or met the consensus estimate in three of the last four quarters while missing on one other occasion.
Overall, Wall Street appears cautiously optimistic about Realty Income’s stock, with a consensus “Moderate Buy” rating. Of the 21 analysts offering recommendations, six advise a “Strong Buy,” one gives a “Moderate Buy,” and the remaining 14 suggest “Hold.”
Yet, the above configuration is slightly less bullish than a month ago when seven analysts were in favor of a “Strong Buy” rating.
On Nov. 14, Mizuho dialed down its outlook on Realty Income, downgrading the stock from "outperform" to "neutral" and trimming the price target from $64 to $60.
The mean price target of $64.20 indicates a 13.6% potential upside from the current price levels, while the Street-high price target of $72 suggests that O could rally as much as 27.3% from here.
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