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Camden Property Trust (NYSE:CPT) shares are trading slightly higher on Monday. BofA Securities analyst Joshua Dennerlein double upgraded the stock to Buy from Underperform and raised the price target to $147 from $111.
This month, the company reported second-quarter Core FFO of $1.71, surpassing the $1.67 estimate, and sales of $387.15 million, exceeding the $385.15 million estimate.
The analyst writes that a recent portfolio trade in Sunbelt led to a reassessment of their view on Sunbelt-focused Camden Property.
Consequently, the analyst adjusted CPT’s cap rate from 6.4% to 5.1%, reflecting its potential undervaluation compared to the current 6.0% implied cap rate.
As noted in the second-quarter earnings recap, Dennerlein expects Sunbelt market rent growth to remain challenged in 2025.
The risk to this outlook is that investors might focus on 2026, when Sunbelt fundamentals are expected to be more balanced, adds the analyst.
BofA economists recently revised their Fed funds forecasts, anticipating a 25bps cut in September and an additional 125bps by the end of 2025. Futures suggest 200bps in cuts by year-end.
These Fed cuts would benefit CPT’s earnings growth, as 15.2% of its debt is floating rate, adds the analyst.
Dennerlein writes that if rents do not significantly soften in 2H24, earnings estimates will likely be revised upward.
Investors can gain exposure to the stock via Nuveen Short-Term REIT ETF (BATS:NURE) and SP Funds S&P Global REIT Sharia ETF (NYSE:SPRE).
Price Action: CPT shares are up 0.38% at $119.78 at the last check Monday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image from Shutterstock
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