Key Points
- Reported EPS of $0.33 and total revenue of $189.8 million, both improvements year over year.
- Core funds from operations per share came in at $0.61.
- Management reaffirmed its current guidance amidst potential market volatility.
STAG Industrial (STAG 1.03%), a prominent real estate investment trust (REIT) specializing in the acquisition and operation of single-tenant industrial properties, reported solid second-quarter earnings on Tuesday that showcased its operational strength and strategic execution.
Earnings per share (EPS) of $0.33 improved nearly 14% year over year. Similarly, total revenue reached $189.8 million, rising 10.5% compared to Q2 2023. Overall, the quarter was marked by robust financial performance.
| Metrics | Q2 2024 | Q2 2023 | Change (YOY) |
|---|---|---|---|
| Diluted EPS | $0.33 | $0.29 | 13.8% |
| Total revenue | $189.8 million | $171.6 million | 10.5% |
| Core FFO per share | $0.61 | $0.56 | 8.9% |
| Cash NOI | $148.4 million | $134.6 million | 10.3% |
Source: STAG Industrial. YOY = Year over year. FFO = Funds from operations. NOI = Net operating income.
Company Overview
STAG Industrial focuses on providing a stable and growing cash flow by acquiring and operating single-tenant industrial properties as an industrial REIT. The company's portfolio includes properties in 41 states across the U.S., highlighting its broad geographic footprint.
Recently, it has emphasized maintaining high occupancy rates and tenant diversification. This strategy minimizes vacancy risk and ensures a stable income stream. Key success factors for STAG include managing rental growth metrics like straight-line and cash rent changes, strategic acquisitions, and solid financial stability.
Quarterly Performance Breakdown
During Q2 2024, STAG Industrial achieved several notable milestones:
Occupancy and Tenant Diversification: STAG Industrial reported an occupancy rate of 97.1%, slightly down from 98.2% as of Dec. 31, 2023. The operating portfolio occupancy rate was 97.5%, compared to 98.4%. No single tenant exceeded 2.9% of total annualized base rental revenue, and no industry accounted for more than 11% of total annualized base rental revenue. These metrics underscore the company's success in maintaining a diversified and stable tenant base.
Rental Growth Metrics: STAG Industrial reported significant increases in its rental growth metrics. The cash rent change for new and renewal leases increased by 36.8%, while the straight-line rent change rose by 51.8% for the quarter. These growth metrics demonstrate the company's ability to capitalize on favorable market conditions to boost rental income.
Acquisition and Portfolio Management: The acquisition strategy remained robust, with the company completing acquisitions of 10 buildings totaling 2.2 million square feet for $225.6 million. In contrast, it sold 7 buildings totaling 1.1 million square feet, generating $78.2 million. The net capitalization rate for the acquisitions was a cash rate of 6.7% and a straight-line rate of 7%.
Financial Stability: STAG maintained a healthy balance sheet with a net debt to annualized run rate adjusted EBITDA ratio of 5.0x. As of June 30, 2024, the company's liquidity stood at $902.9 million. The firm's structure as an umbrella partnership REIT provided flexibility for acquiring properties on a tax-deferred basis.
Looking Ahead
While STAG Industrial did not provide direct forward financial guidance in its earnings release, the company's management expressed a commitment to maintaining current guidance amidst potential market volatility. This outlook reflects the confidence in their portfolio's health and resilience.
Investors should monitor the company's ability to maintain high occupancy rates and strong rental growth, as well as its strategic acquisition activities. Additionally, market volatility, particularly interest rate fluctuations, could impact future acquisition strategies and overall performance.
