3 Real Estate Stocks With High Growth Potential
Real estate stocks are a cornerstone asset class, typically providing a valuable hedge against inflation and steady income stream. Yet, real estate shares have lagged behind the S&P 500 index in 2024.
The Real Estate Select Sector SPDR Fund ETF (NYSEARCA:XLRE), which tracks the S&P 500 real estate sector, has gained slightly over 1% year-to-date (YTD), underperforming the S&P 500’s 15% rise.
However, within this sector, promising opportunities abound. Some companies, particularly those in niche segments or embracing sustainability, are positioned to leverage emerging trends. In addition, potential Fed rate cuts could stimulate the housing market. As these megatrends evolve, investing in select real estate stocks that offer high growth potential and steady dividends could prove advantageous.
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Here are three real estate stocks to consider in the second half of 2024.
CBRE Group (CBRE)
Source: Olivier Le Moal / Shutterstock.com
First on our list of real estate stocks is CBRE Group (NYSE:CBRE). This global commercial real estate firm offers leasing, property sales, mortgage, property management, project management, and investment services.
In the first quarter of 2024, CBRE exceeded expectations with a 7% year-over-year (YOY) increase in net revenue, reaching $7.94 billion. However, core net income fell 17% YOY to $241 million, and core diluted EPS declined 15% to 78 cents, largely due to challenges in property sales amid higher interest rates. Meanwhile, leasing activities exceeded expectations.
CBRE has bolstered its sustainability initiatives by partnering with Climate X to enhance climate risk assessment capabilities. It also plans to merge its Project Management business with its subsidiary, Turner & Townsend, to boost global operations and drive EPS growth, particularly in infrastructure and green energy. Additionally, CBRE is focusing on artificial intelligence integration. Management is utilizing its Nexus AI platform for Smart Facilities Management Solutions across 20,000 sites to enhance efficiency and client outcomes.
In 2024, CBRE stock has gained nearly 5% and currently trades at a 3.6x price-to-book (P/B) ratio. Meanwhile, analysts foresee a potential upside of close to 5%, with a 12-month median price target of $101.50 for CBRE stock.
VICI Properties (VICI)
Source: Maridav/Shutterstock, Inc.
Today’s next pick among the top real estate stocks is VICI Properties (NYSE:VICI). This prominent real estate investment trust (REIT) specializes in gaming, hospitality and entertainment properties, including the Caesars Palace Las Vegas Hotel & Casino. The company’s portfolio spans 29 gaming facilities and 19,200 hotel rooms.
VICI’s latest earnings report demonstrated robust financial performance. Total revenues reached $951.5 million, up 8.4% from the prior year quarter. Adjusted funds from operations (AFFO) rose 10.3% YOY to $583.2 million, or 6.1% to 56 cents per share.
Management announced a $700 million investment in The Venetian Resort Las Vegas through its Partner Property Growth Fund. This capital will fund renovations, gaming floor upgrades and enhancements to the entertainment and convention center. The company highlights that these improvements should boost the guest experience and long-term property value. Additionally, VICI is poised to benefit from the growing casino market, expected to exceed $191 billion by 2029, with a compound annual growth rate (CAGR) of almost 5% from 2024 to 2029.
Despite a nearly 4% decline YTD, VICI Properties stock offers an attractive 5.4% dividend yield. Shares currently trade at a favorable 1.3 times book value. In addition, Wall Street has a 12-month median price forecast of $35.00 for VICI, suggesting about a 14% upside potential.
Weyerhaeuser (WY)
Source: shutterstock
Rounding out our discussion of real estate stocks is Weyerhaeuser (NYSE:WY), one of the world’s largest private timberland owners. The company controls approximately 11 million acres in the U.S. and manages additional timberlands in Canada. As a REIT, Weyerhaeuser is a key player in North America’s wood products manufacturing industry, with segments in Wood Products, Timberlands and Real Estate & Energy and Natural Resources.
In the first quarter of 2024, Weyerhaeuser faced mixed market conditions, with higher domestic sales volumes but significantly lower export sales volumes, particularly to China. Net earnings were $114 million, or 16 cents per diluted share, on net sales of $1.8 billion, compared to $151 million, or 21 cents per diluted share, on net sales of $1.9 billion for the same period last year.
Looking ahead, Weyerhaeuser’s broad wood product range positions it to capitalize on the growing demand driven by housing construction and renovation activity. The company’s goal to generate $100 million of adjusted EBITDA from its Natural Climate Solutions business by 2025 highlights its commitment to leveraging environmental initiatives for growth.
Although WY stock has slumped more than 12% since January, it boasts a 2.6% dividend yield. The shares are changing hands at 2.2 times book value. Finally, analysts have a 12-month median price target of $37.00 for WY stock, indicating nearly a 22% upside potential from current levels.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.
More From InvestorPlace
The post 3 Real Estate Stocks With High Growth Potential? ? ? ? ? ? ? appeared first on InvestorPlace.