On Friday, BMO Capital maintained its positive outlook on Global Net Lease (NYSE:GNL) with an Outperform rating and a steady price target of $11.00. The firm's stance is rooted in the company's recent announcement of closing dispositions worth $170 million at a 7.88% capitalization rate, which aligns with market expectations. This strategic move is aimed at improving the company's leverage.
The announcement detailed that these dispositions are part of Global Net Lease's ongoing efforts to reshape public perception, which has been influenced by its history of external management. The company's proactive approach to managing its portfolio and capital structure has led to this significant transaction, which is expected to impact its financial metrics.
To account for the latest developments, BMO Capital has adjusted its adjusted funds from operations (AFFO) estimates for Global Net Lease for the years 2024 and 2025. The revised figures incorporate anticipated maintenance capital expenditures, particularly concerning multi-tenant retail properties, and assume further dispositions amounting to $380 million in 2025 at a 10.0% capitalization rate.
Despite the adjustments, BMO Capital's analysis suggests that at the $11.00 price target, Global Net Lease's stock would trade at a 24.5% discount compared to its net-lease real estate investment trust (REIT) peers based on 2025 AFFO projections. The firm estimates that Global Net Lease would have a multiple of 9.2x, which is lower than the 12.2x average for the sector.
In other recent news, Global Net Lease (GNL) has experienced significant developments. B.Riley has adjusted its outlook on GNL, reducing the price target from $12.50 to $11.00, while maintaining a Buy rating. This adjustment is due to a slight decrease in the projected Adjusted Funds From Operations (AFFO) per share for fiscal year 2024, adjusting from $1.35 to $1.33. Furthermore, the firm's analysis indicates an anticipated decrease in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) from $612.9 million to $605.5 million.
In other recent developments, GNL reported growth in the first quarter of 2024, with an increase in AFFO per share and active leasing. Despite reporting a net loss of $35 million, the company's asset disposition program is on track, with $554 million already achieved from targeted sales proceeds of $400 to $600 million. In addition, GNL completed a $237 million commercial mortgage-backed securities (CMBS) refinancing, reducing interest expenses and extending debt maturity.
These recent events illustrate GNL's focus on reducing net debt and improving net operating income (NOI). The company also maintains its AFFO per share guidance of $1.30 to $1.40 and a net debt to adjusted EBITDA range of 7.4x to 7.8x for 2024.
InvestingPro Insights
With BMO Capital's optimistic stance on Global Net Lease (NYSE:GNL), it's worth noting some key metrics and insights from InvestingPro that could offer additional context for investors. According to the latest data, Global Net Lease has a market capitalization of approximately $1.67 billion, indicating a sizeable presence in the market. Despite analysts' concerns about profitability, with an adjusted price-to-earnings (P/E) ratio for the last twelve months as of Q1 2024 standing at -9.0, the company has shown impressive revenue growth of 66.67% over the same period. This growth is further highlighted by a quarterly revenue increase of 118.43% in Q1 2024.
Moreover, Global Net Lease is recognized for its significant dividend yield, currently at 15.3%, which is a substantial return for shareholders. This aligns with one of the InvestingPro Tips, which underscores the company's commitment to paying dividends. However, it's also important to be aware that the dividend growth has decreased by 31.25% over the last twelve months as of Q1 2024, which may be a point of consideration for income-focused investors.
For those looking to delve deeper into the financials and prospects of Global Net Lease, there are additional InvestingPro Tips available that discuss sales growth expectations and the company's valuation multiples. To access these insights and more, investors can visit InvestingPro's dedicated section for GNL. And for those interested in a subscription, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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