EastGroup Properties reported earnings on April 18, 2018. The company reported EPS of $1.16 versus the $0.44 estimate. Wow! Earnings beat by an incredible $0.72. Revenue also beat coming in at $72.2 million versus the $71.62 million estimate. EastGroup Properties’s revenue was up 9.1% year-over-year.
EastGroup Properties, Inc. is a self-administered equity real estate investment trust focused on the development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States with an emphasis in the states of Florida, Texas, Arizona, California and North Carolina. The Company’s goal is to maximize shareholder value by being a leading provider in its markets of functional, flexible and quality business distribution space for location sensitive customers (primarily in the 10,000 to 50,000 square foot range). EastGroup’s portfolio currently includes 39 million square feet. The Company’s strategy for growth is based on ownership of premier distribution facilities generally clustered near major transportation features in supply-constrained submarkets.
I like EastGroup’s business model and they have demonstrated that their “compete on location, not price” philosophy is paying off.
Here is the most recent investor presentation that explains their business model and the kinds of properties they are building: EASTGROUP INVESTOR PRESENTATION
The commercial properties they are building and investing in look fantastic and if the Trump Administration can get the ‘I’ component of the GDP formula really humming, EastGroup will make millions on these properties.
EastGroup is an REIT so most people think that when interest rates rise, REITs will get hit hard. That’s not entirely true. Rising interest rates have some effects that are negative for REIT share prices, but others that are positive.
When the Fed hikes short-term interest rates to slow an overheating economy, it may also trim the demand for commercial real estate. As the overall economy slows, rent growth slows and REIT earnings, and earnings of the rest of corporate America, are weakened as well.
Higher long-term interest rates reduce the present value of future dividends. Higher interest rates therefore have a negative impact on the value of REIT shares, as well as corporate equities and most other financial investments.
EastGroup is growing much faster than inflation as well as the speed at which the Fed is hiking rates and so as long as that continues, it’s premature to get bearish on EastGroup because of rising rates.
EGP shows a steady growth in revenue. Measured over the last 5 years, revenue has been growing by 8.09% yearly.
EastGroup Properties has solid profitability metrics. The company has a return on assets of 4.26%. This is better than the industry (Real estate investment trusts) average of 2.21%. EastGroup has a return on equity of 11.07%. This is better than the industry average of 7.46%. The company has a profit margin of 30.34% which is better than the industry average profit margin of 20.61%.
EastGroup Properties Stock Chart
EastGroup Properties stock is a good setup opportunity. I really like how large players volume has begun to turn up. There is a very little resistance above the current price. There is a support zone below the current price at $83.32, a stop order could be placed below this zone.
I give EastGroup stock a buy rating. My price target is $90 which represents 6% upside from the current price. Most analysts do not agree with my buy rating and instead give EastGroup stock a hold rating. Overall there is 1 sell rating, 8 hold ratings, and 2 buy ratings.