Phillips Edison & Company: A Cautious Hold Amidst Mixed Performance Indicators and Steady Outlook

Juan C. Sanabria, an analyst from BMO Capital, maintained the Hold rating on Phillips Edison & Company (PECO – Research Report). The associated price target is $40.00.

Juan C. Sanabria has given his Hold rating due to a combination of factors surrounding Phillips Edison & Company’s recent performance and future expectations. While the company reported a solid same-store net operating income (SSNOI) growth of 3.7% and beat the first quarter 2024 NAREIT funds from operations (FFO) expectations, there are concerns that need to be addressed. The unchanged forecast for the full year 2024, which is slightly below the consensus, coupled with the year-over-year decrease in leased and physical occupancy rates, signals caution. Furthermore, the increase in bad debt as a percentage of revenues raises questions regarding potential tenant financial pressures that the company might face.

Despite these concerns, there are some positive aspects such as the reported beat in core FFO per share against BMO’s estimates, primarily resulting from lower interest expenses and higher capitalized interest. However, the maintained guidance for 2024, which indicates an anticipated growth of 6.0%, sits below the projections by other analysts. Sanabria’s outlook also hinges on the necessity-based retail segment’s resilience, yet there is an eagerness for updates on the company’s investment pipeline and yields in the context of a higher weighted average cost of capital (WACC). The modest acquisition activity in the first quarter is also something to be considered when maintaining a Market Perform (Hold) rating.

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Phillips Edison & Company (PECO) Company Description:

Phillips Edison & Co Inc is a real estate investment trust. It invests primarily in well-occupied, grocery-anchored neighborhood and community shopping centers. It holds an integrated in-house operating platform built on market leading expertise designed to optimize property value and consistently deliver a great shopping experience.