John Kim, an analyst from BMO Capital, maintained the Sell rating on Easterly Government Properties (DEA – Research Report). The associated price target is $11.00.
John Kim has given his Sell rating due to a combination of factors impacting Easterly Government Properties. While the company’s core Funds From Operations per share slightly exceeded BMO Capital and consensus estimates, their guidance for the year suggests only modest growth, which falls below the company’s previous earnings growth target. Kim questions whether the reduced growth trajectory is a result of leasing challenges or difficulties in executing accretive acquisitions, which are pivotal for the company’s expansion and financial health.
Additionally, Kim points out a few financial concerns that likely influenced his rating. The company’s Cash Available for Distribution (CAD) payout ratio is high, exceeding 100%, which he suggests is unsustainable and should be lowered to free up cash for reinvestment. The firm’s leverage has also increased, and although the quality of its tenant cash flows is considered high, the growing debt is a concern. Furthermore, with an increase in the weighted-average interest rate and upcoming debt maturities, there are financial pressures that could affect the company’s performance, contributing to the Sell recommendation.
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Easterly Government Properties (DEA) Company Description:
Easterly Government Properties, Inc. operates as a real estate investment trust, which engages in the acquisition, development, and management of commercial properties that are leased to U.S. Government agencies. The company was founded on October 10, 2014 and is headquartered in Washington, DC.
