Wells Fargo Resumes Realty Income (O) at Outperform
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Price: $62.74 -0.33%
Rating Summary:
18 Buy, 22 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
18 Buy, 22 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Wells Fargo resumes coverage on Realty Income (NYSE: O) with a Outperform and $49-$50 valuation range.
The firm comments, "We are resuming coverage of O shares with an Outperform rating and a $48-50 per share valuation range, which straddles our dividend discount model (DDM)-derived valuation estimate of $49 per share. The $3 billion ARCT acquisition has closed and has added meaningfully to 2013 FFO expectations, which has prompted a relatively large dividend increase for O shareholders (+19%). Other positive investment considerations include: (1) valuation suggests good entry point--our DDM suggests a $49 per share valuation, or 18% above current levels on a total return basis and the shares have yet to reflect the full earnings accretion impact of the ARCT deal in our view, (2) the company remains in growth mode--with portfolio-sized acquisitions becoming more of the norm due to continued net lease industry consolidation, which should benefit valuation and visibility into earnings and dividend growth, and (3) clean balance sheet with limited near-term debt maturities ($100MM due in March 2012; next maturity is a manageable $150MM in 2015), which should provide the backdrop for tapping the unsecured debt capital markets under long-duration, low-cost terms. Our FFO estimates for 2012 and 2013 are $2.01 and $2.37 per share, respectively and within management’s guided ranges (2012: $2.00-2.04; 2013: $2.32-2.38). Our valuation range of $48-50 per share implies 15-20% total return potential."
For an analyst ratings summary and ratings history on Realty Income click here. For more ratings news on Realty Income click here.
Shares of Realty Income closed at $43.48 yesterday.
The firm comments, "We are resuming coverage of O shares with an Outperform rating and a $48-50 per share valuation range, which straddles our dividend discount model (DDM)-derived valuation estimate of $49 per share. The $3 billion ARCT acquisition has closed and has added meaningfully to 2013 FFO expectations, which has prompted a relatively large dividend increase for O shareholders (+19%). Other positive investment considerations include: (1) valuation suggests good entry point--our DDM suggests a $49 per share valuation, or 18% above current levels on a total return basis and the shares have yet to reflect the full earnings accretion impact of the ARCT deal in our view, (2) the company remains in growth mode--with portfolio-sized acquisitions becoming more of the norm due to continued net lease industry consolidation, which should benefit valuation and visibility into earnings and dividend growth, and (3) clean balance sheet with limited near-term debt maturities ($100MM due in March 2012; next maturity is a manageable $150MM in 2015), which should provide the backdrop for tapping the unsecured debt capital markets under long-duration, low-cost terms. Our FFO estimates for 2012 and 2013 are $2.01 and $2.37 per share, respectively and within management’s guided ranges (2012: $2.00-2.04; 2013: $2.32-2.38). Our valuation range of $48-50 per share implies 15-20% total return potential."
For an analyst ratings summary and ratings history on Realty Income click here. For more ratings news on Realty Income click here.
Shares of Realty Income closed at $43.48 yesterday.
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