Granite Real Estate (GRT.UN) AI Stock Analysis

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TSE:GRT.UN Dividends

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Granite Real Estate

(TSX:GRT.UN)

73Outperform

Granite Real Estate's strong financial performance, characterized by significant revenue growth and robust cash flow, is the primary driver of its score. Despite the positive financials, technical indicators suggest a bearish trend, which is a concern. However, the stock's valuation is appealing due to a low P/E ratio and high dividend yield, providing a cushion for investors. Overall, the company presents a stable investment opportunity, but market trends should be closely monitored.

Positive Factors

Distribution Increase

Granite's distribution increase represents the 14th consecutive year of raising distributions, equating to a yield of 4.6%.

Earnings

Granite REIT reported impressive year-end results that were ahead of expectations, with FFO per unit jumping 16% in the quarter.

Valuation

Granite currently trades at an implied cap rate of 6.7% or a 25.7% discount to the NAV estimate, which suggests potential upside.

Negative Factors

Interest Expense

Greater interest expense from refinancing debt at higher interest rates partially offsets positive factors.

Stock Performance

The unit price has lagged performance due to the rise in interest rates and concerns over a slowing economy.

Granite Real Estate (GRT.UN) vs. S&P 500 (SPY)

Market Cap

C$3.91B

Dividend Yield5.24%

Average Volume (3M)129.52K

Price to Earnings (P/E)11.0

Beta (1Y)0.93

Revenue Growth9.19%

EPS Growth166.98%

CountryCA

Employees70

SectorReal Estate

Sector Strength83

IndustryREIT - Industrial

Share Statistics

EPS (TTM)5.73

Shares Outstanding62,265,785

10 Day Avg. Volume83,915

30 Day Avg. Volume129,517

Financial Highlights & Ratios

PEG Ratio0.07

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$83.80

Price Target Upside32.51% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering5

Granite Real Estate Business Overview & Revenue Model

Company DescriptionGranite is a Canadian-based REIT engaged in the acquisition, development, ownership and management of logistics, warehouse and industrial properties in North America and Europe. Granite owns 108 investment properties representing approximately 45.3 million square feet of leasable area.

How the Company Makes MoneyGranite Real Estate makes money primarily through the leasing of its industrial, warehouse, and logistics properties to tenants. The company generates revenue through rental income, which is typically derived from long-term lease agreements with tenants. These leases often include provisions for rent escalations, which provide a steady and growing income stream over time. In addition to rental income, Granite Real Estate may also earn money through property management fees and strategic property sales. The company's earnings are further supported by its ability to acquire and develop new properties, enhancing its portfolio and increasing potential rental income. Key factors contributing to its revenue include the strategic location of its properties, high occupancy rates, and the financial stability of its tenant base.

Granite Real Estate Financial Statement Overview

Summary

Granite Real Estate exhibits strong financial health with robust revenue growth and efficient cash flow management. The balance sheet reflects a stable financial position despite a slight increase in leverage. The company's focus on maintaining high margins and growing equity bodes well for its future prospects, though monitoring EBIT performance is advisable.

Income Statement

Very Positive

Granite Real Estate has demonstrated strong revenue growth over the years, with a notable increase from $455.6M in 2022 to $569.1M in 2024. The gross profit margin is consistently high, at 82.9% for 2024, indicating efficient cost management. However, the absence of EBIT in 2024 is a concern, though it's offset by a strong EBITDA margin of 84.4%.

Balance Sheet

Positive

The company's balance sheet is stable with a moderate debt-to-equity ratio of 0.54 in 2024. Stockholders' equity has grown from $3.92B in 2020 to $5.73B in 2024, which is a positive sign. However, the equity ratio has slightly decreased from 58.2% in 2020 to 59.5% in 2024, indicating a balanced approach to leveraging assets.

Cash Flow

Very Positive

Granite Real Estate has consistently positive operating cash flow, with a significant increase in free cash flow from $276.7M in 2022 to $338.5M in 2024. The operating cash flow to net income ratio is strong at 0.94 in 2024, showing efficient cash generation relative to net income.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
569.14M	521.25M	455.58M	393.49M	340.20M
	Gross Profit
471.99M	435.24M	380.36M	332.68M	293.04M
	EBIT
0.00	394.79M	345.14M	292.19M	259.82M
	EBITDA
480.48M	203.14M	346.73M	293.51M	260.98M
	Net Income Common Stockholders
360.61M	136.66M	155.77M	1.31B	429.80M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
126.17M	116.13M	135.08M	402.51M	831.28M
	Total Assets
9.62B	9.07B	9.28B	8.57B	6.75B
	Total Debt
3.11B	3.10B	3.07B	2.46B	2.21B
	Net Debt
2.99B	2.98B	2.93B	2.06B	1.38B
	Total Liabilities
3.88B	3.78B	3.80B	3.25B	2.83B
	Stockholders Equity
5.73B	5.28B	5.48B	5.32B	3.92B
Cash Flow		Free Cash Flow
338.48M	312.90M	276.69M	261.68M	179.03M
	Operating Cash Flow
338.61M	313.18M	277.50M	262.26M	244.32M
	Investing Cash Flow
-65.46M	-128.13M	-766.56M	-1.03B	-1.07B
	Financing Cash Flow
-267.50M	-203.11M	214.56M	333.48M	1.36B

Granite Real Estate Technical Analysis

Technical Analysis Sentiment

Negative

Last Price63.24

Price Trends

50DMA

64.72

Negative

100DMA

66.76

Negative

200DMA

70.31

Negative

Market Momentum

MACD

-0.51

Negative

RSI

49.21

Neutral

STOCH

72.54

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:GRT.UN, the sentiment is Negative. The current price of 63.24 is above the 20-day moving average (MA) of 61.24, below the 50-day MA of 64.72, and below the 200-day MA of 70.31, indicating a neutral trend. The MACD of -0.51 indicates Negative momentum. The RSI at 49.21 is Neutral, neither overbought nor oversold. The STOCH value of 72.54 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:GRT.UN.

Granite Real Estate Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SRU.UN	76 Outperform	C$4.34B	19.18	4.50%	7.26%	9.46%	-42.77%
GRT.UN	73 Outperform	C$3.91B	10.96	6.55%	5.24%	9.19%	166.98%
CAR.UN	68 Neutral	C$6.81B	24.24	3.20%	3.54%	4.45%	―
Sector *	60 Neutral	$2.73B	11.44	0.07%	8661.49%	5.94%	-15.68%

* Real Estate Sector Average

Performance Comparison

TSE:GRT.UN

Granite Real Estate

62.74

-3.66

-5.51%

RIOCF

RioCan Real Estate Investment

12.37

0.03

0.24%

TSE:CAR.UN

Canadian Apartment

43.24

1.15

2.73%

TSE:SRU.UN

SmartCentres Real Estate Investment Trust

25.52

4.62

22.11%

DRETF

Dream Office Real Estate Investment

11.20

-1.84

-14.11%

APYRF

Allied Properties Real Estate Investment Trust

10.90

-0.14

-1.27%

Granite Real Estate Earnings Call Summary

Earnings Call Date:Feb 26, 2025

(Q3-2024)

% Change Since: -6.26%|

Next Earnings Date:May 07, 2025

Earnings Call Sentiment Positive

The earnings call presented a generally positive performance with strong NOI growth, increased FFO and AFFO, successful leasing and expansions, and significant ESG achievements. However, challenges such as increased G&A expenses, occupancy declines, tenant bankruptcy, and potential economic policy impacts were also highlighted.

Q3-2024 Updates

Positive Updates

Strong NOI Growth

Granite posted results ahead of Q2 and in line with annual forecast, largely driven by strong NOI growth. Same-property NOI increased 6.2% on a constant currency basis and 8% with foreign currency effects.

Increase in FFO and AFFO

FFO per unit in Q3 was $1.35, a 2.3% increase from Q2 and an 8.9% increase relative to the same quarter last year. AFFO per unit increased by $0.05 relative to Q2 and $0.13 relative to the same quarter last year.

Successful Leasing and Developments

Achieved an average rental rate increase of 55% over expiring rents. Completed expansions in Ajax, Ontario, and the Netherlands with strong leasing spreads.

ESG Achievements

Ranked #1 by GRESB among North American industrial REITs. Solar PV systems capacity reached over 45 megawatts, with 44% of properties achieving green building certification.

Refinancing Success

Completed $800 million of bond offerings, extending the weighted average debt term to maturity to 4.6 years and maintaining a stable interest expense outlook.

Negative Updates

Increased G&A Expenses

G&A for the quarter was $13.2 million, $5.5 million higher than Q2, mainly due to $5.6 million of unfavorable fair value variance in non-cash compensation liabilities.

Occupancy Challenges

Occupancy slightly declined by 20 bps to 94.5% in Q3. Expected year-end occupancy revised to closer to 95%, down from an earlier forecast of 96% to 97%.

Chapter 11 Filing by Tenant

True Value Company, a tenant, filed for Chapter 11 proceedings. Although they remain current on rent, the outcome is uncertain.

Potential Impact from U.S. Economic Policies

Uncertainty surrounding U.S. economic policies, particularly related to tariffs, may affect future demand and tenant decisions.

Company Guidance

In the Q3 2024 earnings call for Granite REIT, the company provided guidance indicating a promising financial trajectory with several key metrics highlighted. The Funds from Operations (FFO) per unit for the quarter was reported at $1.35, a 2.3% increase from Q2, and an 8.9% increase from the previous year, aligning with the annual guidance. The Adjusted Funds from Operations (AFFO) per unit increased to $1.22, up $0.05 from Q2 and $0.13 from the same quarter last year. The Net Operating Income (NOI) showed robust growth due to favorable leasing spreads and expansion projects, although slightly offset by new vacancies. Same-property NOI grew by 6.2% on a constant currency basis, with an 8% increase when foreign currency effects were considered. The guidance for 2024 was updated, maintaining the FFO per unit range between $5.30 to $5.40, while the AFFO per unit forecast was revised to $4.65 to $4.75 due to reduced capital expenditure estimates. The company's balance sheet remained strong with total assets of $9.3 million and a weighted average cap rate of 5.3% on in-place NOI. Granite's liquidity was bolstered to approximately $1.4 billion, with no borrowings under its credit facility. Overall, Granite REIT's strategic refinancing and leasing activities underscore a stable outlook with anticipated continued growth in NOI and cash flow for 2024.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.