UBS Reiterates Sell on Education Realty Trust (EDR) Following Announced Equity Deal
UBS reiterated a Sell rating on Education Realty Trust (NYSE: EDR), and raised the price target to $32.00 (from $30.00), following the company's 3Q15 earnings results. 3Q15 Core FFO of $0.30 beat the consensus of $0.27. EDR lifted 2015 core guidance to $1.82-$1.85 (from $1.74-$1.82), which includes the impact of a 6.5m share follow-on equity offering announced this morning (but which is a more dilutive event to 2016 in our model). The equity offering will be used to pay down the line of credit and fund development.
Analyst Nick Yulico commented, "The 3Q FFO beat was a result of better than expected top-line revenue offset by higher expenses and lower third party income. While an announced equity deal (~$250m) being priced this week helps deleverage EDR, the deal carries some dilution. We now estimate 2016 core FFO of $1.92 (down from $1.96 previously), which should result in 5% FFO growth next year (up from -2% this year), as growth has been hurt by deleveraging. While EDR is making the right steps in reducing debt (and variable rate exposure), we think the stock looks expensive today and see risk that 2016 FFO Street estimates are too high ($2.00 consensus)."
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Shares of Education Realty Trust closed at $35.48 yesterday.