On Wednesday, KKR Real Estate Finance Trust (NYSE:KREF) saw its price target lowered to $12.00 from the previous $13.00, as announced by JMP Securities. The firm retained its Market Outperform rating on the stock. This adjustment follows KKR Real Estate Finance Trust's first quarter financial report, which indicated a GAAP loss of $0.13 per share, although distributable earnings reached $0.39 per share. This latter figure surpassed the consensus of $0.31 but did not meet JMP Securities' higher expectation of $0.54.
The company's distributable earnings per share were sufficient to cover the quarterly dividend of $0.25, resulting in a coverage ratio of 156%. However, the GAAP earnings were adversely affected by an additional $33 million, or $0.48 per share, provision for credit losses under the Current Expected Credit Loss (CECL) accounting standard. This provision contributed to a decrease in the book value per share, which fell to $15.18 from $15.52 at the end of the previous quarter.
The revised $12.00 price target is based on an 8.3% required yield on the company's current annualized dividend of $1.00 and corresponds to 0.79 times the book value. The analyst from JMP Securities suggests that if the price target is met, shareholders could anticipate a potential total return of approximately 30%, which includes a 19.8% price appreciation and a cash dividend yield of 9.9%.
The reevaluation of KKR Real Estate Finance Trust's price target comes after considering the recent financial outcomes and the impact of increased CECL reserves on the company's book value. Despite the reduction in the price target, the Market Outperform rating indicates a continued positive outlook on the stock's performance.
InvestingPro Insights
Following the recent financial report and price target adjustment for KKR Real Estate Finance Trust (NYSE:KREF), it's essential to consider the latest data and expert analysis to understand the stock's potential further. According to InvestingPro, KREF's net income is expected to grow this year, which aligns with the analyst's positive outlook on the stock. This anticipated growth could be a driving factor for future performance.
For income-focused investors, KREF pays a significant dividend to shareholders, with a current dividend yield of 9.98%, which is quite attractive in today's market. Additionally, the company's liquid assets exceed its short-term obligations, providing financial flexibility and stability.
InvestingPro Data highlights a substantial revenue growth of 56.36% over the last twelve months as of Q1 2024, which is a positive indicator of the company's ability to increase its earnings. However, it's worth noting that the company has not been profitable over the last twelve months, with a negative P/E ratio of -21.24. Despite this, analysts predict that KREF will be profitable this year, which could lead to a re-rating of the stock.
To gain deeper insights and access additional InvestingPro Tips, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 5 more InvestingPro Tips available for KREF at Investing.com/pro/KREF, which could provide valuable guidance for your investment decisions.
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