EPR Properties: Navigating Seasonality and Market Challenges with a Hold Recommendation

JMP Securities analyst Mitchell Germain has maintained their neutral stance on EPR stock, giving a Hold rating today.

Mitchell Germain’s rating is based on a nuanced understanding of EPR Properties’ performance and market context. Despite maintaining full-year estimates, Germain acknowledges the inherent seasonality affecting first-quarter earnings, which typically see less percentage rent and higher professional fees, coupled with slower performance in lodging-related operating assets. EPR’s stock continues to trade at a discount, sitting below the sector average, which is somewhat justified by the lasting effects of the pandemic on the movie industry—a significant contributor to EPR’s EBITDA. The past year saw EPR overcoming challenges, such as a major tenant bankruptcy through lease restructuring and improved portfolio coverage metrics, yet the Hold rating reflects caution due to potential economic downturns, lagging growth prospects compared to peers, and uncertain sentiment towards the movie industry.

Germain has fine-tuned his model to better reflect the quarterly performance of EPR, taking into account the specific challenges of the first quarter. Despite a 6% reduction in full-year core FFO/share estimate for 2024, he expects earnings to be more predictable post-pandemic, with movie theater rents now being reported on a GAAP basis. The box office performance in 2024 has been better than expected, despite a strike affecting the industry, but the future lineup of movie releases raises concerns due to a heavy reliance on sequels that underperformed in the previous year. EPR’s earnings could be impacted by these industry trends, given the revised lease with Regal that includes a significant percentage rent component. Lastly, Germain is anticipating updates on the company’s asset recycling efforts, which involve the sale of vacant theater properties, a factor that could influence the company’s financial position moving forward.

In another report released today, Stifel Nicolaus also maintained a Hold rating on the stock with a $42.50 price target.

TipRanks tracks over 100,000 company insiders, identifying the select few who excel in timing their transactions. By upgrading to TipRanks Premium, you will gain access to this exclusive data and discover crucial insights to guide your investment decisions. Begin your TipRanks Premium journey today.

EPR Properties (EPR) Company Description:

EPR Properties operates as a real estate investment trust. The firm engages in the development, finance, and leasing of theatres, entertainment retail and family entertainment centers. It operates through the following segments: Entertainment and Education. The Entertainment segment includes investments in megaplex theatres, entertainment retail centers, family entertainment centers and other retail parcels. The Education segment comprises of entirely of investments in public charter schools. The company was founded by Peter C. Brown on August 22, 1997 and is headquartered in Kansas City, MO.