On Friday, Baird increased its price target for UDR, Inc. (NYSE:UDR) shares to $42.00, up from the previous $39.00, while maintaining an Outperform rating on the stock. The adjustment follows UDR's performance in the first quarter, which slightly exceeded expectations.
The company witnessed an acceleration in blended rent growth, now approximately 100 basis points higher than initially projected for the second quarter, with coastal markets leading the charge.
The Washington D.C. market, which contributes about 15% of UDR's net operating income (NOI), has shown notable momentum with early second-quarter blended rent growth ranging between 4-5%.
A significant reduction in turnover, down by 400 basis points, has also contributed to the acceleration in blended rent growth. This is largely due to a substantial difference in renewal versus new lease growth, which was 630 basis points in the first quarter.
UDR's current loss to lease stands at approximately 2-2.5%, and the company anticipates the gap between renewal and new lease growth to narrow to 300-400 basis points. In response to these trends, UDR has indicated a more aggressive stance on lease renewals.
On the acquisitions side, UDR, in partnership with its joint venture partner LaSalle, is actively seeking to acquire assets. Additionally, a significant development for the company was the securing of a loan by the developer of 1300 Fairmont, which allows UDR to continue accruing income on its DCP investment.
UDR also keeps a close watch on three other DCP investments, valued at $50 million, with debt yields around 6-7%, slightly below the high-single-digits of the balance of DCP investments.
InvestingPro Insights
Following Baird's updated price target for UDR, Inc., InvestingPro data reveals a nuanced picture of the company's financial health and market performance. UDR's adjusted market capitalization stands at $14.04 billion, reflecting its substantial presence in the real estate sector. With a Price/Earnings (P/E) ratio of 28.46, investors are showing confidence in UDR's earnings potential, although the adjusted P/E ratio for the last twelve months as of Q1 2024 is notably higher at 91.57. This indicates expectations of significant future earnings growth, underscored by a PEG ratio of 0.08 for the same period, suggesting that the stock may be undervalued relative to its earnings growth.
Furthermore, the company's revenue growth remains steady, with a 3.98% increase over the last twelve months as of Q1 2024, and a gross profit margin of 66.51% demonstrates strong profitability. For investors seeking income as well as growth, UDR's dividend yield of 4.38% as of day 145 in 2024 is particularly attractive, coupled with a modest dividend growth of 1.19% over the last twelve months.
InvestingPro Tips highlight that UDR's price is currently at 88.16% of its 52-week high and has shown a resilient 6-month price total return of 19.0%. Additionally, subscribers to InvestingPro can access several more tips that can provide deeper insights into UDR's performance and potential investment strategies. To enhance your investment research, consider using the promo code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to InvestingPro, where numerous additional tips await.
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