When it comes to real estate stocks, investors often seek out established names for reliable income and protection against inflation. However, in the tumultuous landscape of 2024, these stocks have fallen short of the S&P 500 index’s soaring heights. Despite this backdrop, the Real Estate Select Sector SPDR Fund ETF (NYSEARCA:XLRE), tracking the S&P 500 real estate sector, has managed a modest 1% uptick since the year began, a far cry from the broader market’s 15% leap.
While the terrain appears rocky, a glimmer of hope shines through the cracks. Unnoticed by many, certain real estate companies are embracing change and setting themselves up to ride the wave of emerging trends. With potential Federal Reserve rate cuts on the horizon, the housing market could catch fire. In such a volatile environment, selecting the right real estate stocks that promise robust growth and consistent dividends may prove to be a shrewd move.
The CBRE Revolution
Our journey begins with CBRE Group (NYSE:CBRE), the global juggernaut in commercial real estate services. From leasing to property management, CBRE stands at the forefront of it all.
In the first quarter of 2024, CBRE smashed through expectations with a 7% year-over-year jump in net revenue, scaling a dizzying $7.94 billion. However, a darker side lurked beneath the glitz as core net income plummeted by 17% year-over-year to $241 million, while core diluted EPS sank by 15% to 78 cents, haunted by stumbling property sales amidst rising interest rates. Yet, amidst the chaos, leasing activities managed to exceed expectations.
CBRE’s commitment to sustainability took center stage as it joined hands with Climate X to ameliorate climate risk assessment capabilities. Furthermore, the company plans to fuse its Project Management business with its subsidiary, Turner & Townsend, in a bid to supercharge global operations and fuel EPS growth, especially in infrastructure and green energy. And let’s not forget about the artificial intelligence onslaught – CBRE is diving deep into AI integration, harnessing its Nexus AI platform for Smart Facilities Management Solutions across 20,000 sites to enhance efficacy and client outcomes.
Despite the roller coaster, CBRE’s stock has managed to eke out a 5% gain in 2024, currently sporting a 3.6x price-to-book (P/B) ratio. Analysts are eyeing a potential upside of nearly 5%, with a 12-month median price target of $101.50 for CBRE stock.
The Rise of VICI Properties
Our saga continues with VICI Properties (NYSE:VICI), the titan in real estate investment trusts (REITs) specializing in gaming, hospitality, and entertainment properties, including the illustrious Caesars Palace Las Vegas Hotel & Casino.
Upon a closer look at their latest earnings report, VCI Properties showcased stellar financial fortitude. Total revenues surged to $951.5 million, a striking 8.4% leap from the previous year’s quarter. Adjusted funds from operations (AFFO) climbed a commendable 10.3% year-over-year to $583.2 million, translating to a 6.1% uptick to 56 cents per share.
Under the banner of transformation, management announced a whopping $700 million injection into The Venetian Resort Las Vegas through its Partner Property Growth Fund. This capital infusion will breathe new life into renovations, gaming floor upgrades, and enhancements to the entertainment and convention center. These enhancements are anticipated to bolster guest experiences and amplify long-term property value. Also, with the casino market poised for an explosion, expected to surpass $191 billion by 2029, VICI is standing strong, with a compound annual growth rate (CAGR) nearing 5% from 2024 to 2029.
Despites its nearly 4% stumble year-to-date, VICI Properties stock remains an alluring prospect with a promising upside potential as the tides of change sweep over the real estate landscape.