Entertainment Properties Trust
) offers investors strong growth and stellar income at a reasonable
Based on consensus estimates, analysts project 13% funds from
operation (FFO) growth this year and 7% growth next year. And these
estimates have been on the upswing after management raised its 2012
guidance following better than expected fourth quarter results.
It is a Zacks #2 Rank (Buy).
The company also recently raised its quarterly dividend by 7%. It
currently yields a whopping 6.1%.
Entertainment Properties Trust is a real estate investment trust
(REIT) that primarily invests in entertainment-oriented real estate
like megaplex movie theatres and entertainment retail centers. It
also owns public charter schools, ski resorts and wineries and
The company is headquartered in Kansas City, Missouri and has a
market cap of $2.2 billion.
Fourth Quarter Results
Entertainment Properties reported better than expected fourth
quarter results on February 23. FFO per share came in at 91 cents,
beating the Zacks Consensus Estimate by 3 cents. It was a 6%
increase over the same quarter in 2010.
Total revenue rose 4% to $77.6 million, ahead of the Zacks
Consensus Estimate of $71.0 million. Rental revenue, which
accounted for 74% of total revenue, increased 2%.
Meanwhile, income from continuing operations increased 14% as the
company leveraged its fixed expenses.
Management raised its guidance for 2012 following strong Q4
results. The company now expects 2012 FFO between $3.50 and $3.70,
up from previous guidance of $3.44-$3.64.
This prompted analysts to revise their estimates higher, sending
the stock to a Zacks #2 Rank (Buy). The Zacks Consensus Estimate
for 2012 is now $3.61, representing 13% growth over 2011 FFO. The
2013 consensus estimate is 7% higher at $3.87.
The company plans to enter into 8-10 new build-to-suit theater
investment in the first quarter and spend a total of $250-$350
million this year on new investments to drive long-term FFO growth.
As a REIT, Entertainment Properties pays out the majority of its
earnings to shareholders through dividends. It currently yields a
The company did cut its dividend back in early 2009, but it has
raised it twice since then. It is still about 17% below its pre-cut
The valuation picture looks reasonable for EPR. Shares trade at
just 12.7x 12-month forward earnings, a discount to the industry
median of 14.2x.
And its price to tangible book ratio is just 1.5, below the
industry multiple of 1.8.
The Bottom Line
With rising estimates, strong growth, a juicy 6.1% yield and
reasonable valuation, Entertainment Properties Trust offers
attractive total return potential.
Todd Bunton is the Growth & Income Stock Strategist for
and Co-Editor of the
Reitmeister Value Investor
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