FBR Capital Cuts Price Target on Government Properties Income Trust (GOV) to $25
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FBR Capital maintained an Outperform rating on Government Properties Income Trust (NASDAQ: GOV), and cut the price target to $25.00 (from $27.00), following the company's 3Q earnings report. GOV's results missed estimates partially on temporarily higher-than-expected "other" expenses. FFO/share was $0.54, below the consensus of $0.57.
Analyst Bryan Maher commented, "Government Properties reported 3Q16 results that are best characterized as mixed. Adjusted EBITDA of $47.1 million was above consensus ($41.8 million), although that was skewed lower by an outlier analyst, but was shy of our $48.2 million estimate as expenses were about $1.5 million above our estimate. Management characterized a portion of this as one-time in nature on the earnings call. FFO/share was $0.54, below both our estimate and consensus of $0.58 and $0.57, respectively. One item impacting the shortfall was slightly higher interest expense related to GOV's 2Q16 $310 million senior unsecured notes offering and slightly higher LIBOR rates impacting its floating rate debt. Aside from this, same property occupancy levels improved to 95.2%, from 94.4% at 2Q16 and 93.8% at 3Q15. We had modeled for 94.6%. In short, it was a decent quarter negatively impacted by interest rates and some one-time items. The downside is the interest rate impact is not likely to abate and rising rates could pressure all REIT shares over the near term. We remain constructive on GOV shares and maintain our Outperform rating."
Shares of Government Properties closed at $19.00 yesterday.
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