Strong Farm Income and Asset Appreciation Makes Farmland Partners Attractive, Says Analyst

Author: Shivani Kumaresan | December 26, 2023 02:51pm

Raymond James analyst Buck Horne reiterated an Outperform rating on the shares of Farmland Partners Inc (NYSE:FPI) and raised the price target from $14 to $15.

Though agricultural commodity prices have fallen about 10% year-over-year (per USDA data), U.S. farmers continue to enjoy strong farm-level profitability, says the analyst.

According to the analyst, 2023 is expected to rank as the third-highest year for farm income in the past decade. 

Year-to-date, FPI has repurchased over 11% of its outstanding shares for $11/ share and announced a special dividend of $0.21/ share this month, making its next twelve-month yield at 3.5%.

The analyst believes FPI continues to benefit from strong appreciation in farmland values as it has one of the largest portfolios of commodity row crop acreage in the U.S.

During the quarter, FPI completed 35 property dispositions for a total cash consideration of $71.1 million, bringing the year-to-date total to about $122 million, notes the analyst.

The company is arbitraging the wide discount between its implied public valuation and private market value through a $190 million capital recycling program launched earlier this year, writes the analyst.

The analyst also highlights the fact that FPI’s 2023 lease renewals are averaging a third year of double-digit increases (+18% YTD in 2023).

According to the analyst, FPI has enough resources to maintain its current dividend, supported by $163.1 million in available liquidity.

He currently estimates FPI’s Net Asset Value/share at approximately $16/share, which leaves shares priced at a compelling 20% NAV discount.

The analyst’s $15 target price projects FPI shares recovering to just under a ~10% discount to the current NAV.

Price Action: FPI shares are trading higher by 1.65% at $12.97 on the last check Tuesday.

Posted In: FPI