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The yield on the 10-year Treasury, which sets the tone for borrowing costs across the economy, reached 5.3 percent this week. This is a headwind for real estate investment trusts like NNN because they rely on debt to buy new properties.
When these yields rise, the cost of taking out new loans or refinancing old ones goes up. For NNN, this can eat into the profit it makes from its rental properties, as the gap between the rent it collects and the interest it pays begins to shrink.
Source: CNBC International TV
Morgan Stanley upgraded the company to its highest rating, signaling more confidence in the stock's potential compared to other real estate firms. This kind of move from a major firm often suggests they believe the current price does not fully reflect the value of the company's 3,700 properties and its long history of dividend increases.
While Evercore ISI slightly lowered its price target to $47 during the same week, the average analyst target remains around $48. This suggests that despite the pressure of higher interest rates, many analysts still see room for the stock to rise from its current level of about $41.
Management consistently sets a low bar and clears it with small, steady beats. This predictable pattern shows they have a firm handle on their rental income and costs.
| Expectation | |
|---|---|
| EPS | $0.53 |
| Revenue | $245M |