EPR Properties (EPR) is falling 8% in pre-market trading on Thursday after reporting weak first quarter results and announcing the suspension of dividend payouts and share buybacks. Shares have now plunged 62% year-to-date.
The Kansas-based real estate investment trust, that invests in ‘experiential properties’ like amusement parks, theaters, and ski resorts, reported Q1 FFO of $0.97 missing the Street expectations by $0.14. Meanwhile revenue of $151.01M (+0.3% year-over-year) also fell short of Street forecasts by $2.42M.
“Today we are announcing further measures to ensure our liquidity, including the temporary suspension of our monthly cash dividend to common shareholders and a planned suspension of our share repurchase program” commented CEO Greg Silvers, adding “We do not take these steps lightly; however, given the uncertainties that exist, we believed it unwise to burden our future with a higher leveraged balance sheet.”
The dividend will be suspended following the $0.3825 common share dividend payable May 15, 2020. The EPR board has previously declared monthly cash dividends during the first quarter of 2020 totaling $1.1325 per share.
Following the announcement, RBC Capital analyst Michael Carroll told investors: “The 1Q20 report was soft, but at the same time, this was largely expected given the challenges that EPR currently faces.” He has a buy rating on the stock and $45 price target.
According to the analyst “These headwinds will likely persist at least until the tenant base is able to re-open their respective operations.” Most notably EPR received only 15% of its April rent payments, which Carroll believes is mainly from the attractions, ski resorts, and gaming segments.
He praised the company’s decision to suspend the dividend and modify certain debt covenants, writing “We believe both of these steps are necessary to ensure that the company can navigate the current uncertainty and, hopefully, reach a post-COVID operating environment.”
Encouragingly, Carroll notes that the company has $1.2 billion of cash as of quarter-end, giving EPR about four years of liquidity at its current rate of cash burn. Overall, the Street has a cautiously optimistic Moderate Buy consensus on EPR with an average analyst price target of $33 (25% upside potential). (See EPR stock analysis on TipRanks).
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