STAG Industrial, Inc. (STAG) Bundle
Understanding STAG Industrial, Inc. (STAG) Revenue Streams
Understanding STAG Industrial, Inc.’s Revenue Streams
Primary Revenue Sources:
- Rental Income: $526.4 million for the nine months ended September 30, 2024, compared to $503.1 million for the same period in 2023, an increase of 4.6%.
- Other Income: $138,000 for the nine months ended September 30, 2024, down from $233,000 in 2023, a decrease of 40.8%.
Year-over-Year Revenue Growth Rate:
The total operating revenue for the nine months ended September 30, 2024, was $526.5 million, reflecting a year-over-year increase of 4.6% compared to $503.3 million for 2023.
Contribution of Different Business Segments to Overall Revenue:
| Revenue Source | 2024 (in millions) | 2023 (in millions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Rental Income | $526.4 | $503.1 | $23.3 | 4.6% |
| Other Income | $0.138 | $0.233 | ($0.095) | (40.8%) |
| Total Operating Revenue | $526.5 | $503.3 | $23.2 | 4.6% |
Significant Changes in Revenue Streams:
Same store rental income increased by approximately $16.9 million, or 4.1%, to $427.4 million for the nine months ended September 30, 2024, compared to $410.5 million for the same period in 2023. This increase was primarily driven by new leases and lease renewals.
However, there was a reduction of base rent of approximately $4.7 million due to tenant vacancies. Additionally, the amortization of above-market leases netted an increase of approximately $0.7 million.
Summary of Revenue Performance:
The overall revenue growth reflects the company's ability to expand its rental income streams while managing tenant-related challenges effectively.
A Deep Dive into STAG Industrial, Inc. (STAG) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was approximately 80.3%, compared to 80.1% for the same period in 2023.
Operating Profit: Operating profit for the nine months ended September 30, 2024 was $141.3 million, down from $154.6 million in the prior year, representing a decrease of 8.6%.
Net Profit Margin: The net profit margin for the nine months ended September 30, 2024 was 26.8%, compared to 29.8% for the same period in 2023.
Trends in Profitability Over Time
Net income for the three months ended September 30, 2024 was $42.7 million, a decrease of 16.5% compared to $51.2 million for the same period in 2023. For the nine months ended September 30, 2024, net income decreased to $141.3 million from $154.6 million in 2023.
Comparison of Profitability Ratios with Industry Averages
| Metric | STAG Industrial (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 80.3% | 75.0% |
| Operating Profit Margin | 26.8% | 22.0% |
| Net Profit Margin | 26.8% | 20.0% |
Analysis of Operational Efficiency
Cost Management: Total expenses increased to $377.2 million for the nine months ended September 30, 2024, compared to $350.1 million in 2023, which reflects an increase of 7.7%.
Gross Margin Trends: The gross margin improved slightly year-over-year, indicating effective cost management strategies were implemented to maintain profitability despite rising operating costs.
Total operating revenue for the nine months ended September 30, 2024 was $526.4 million, up from $503.1 million in the previous year.
Net Operating Income (NOI)
Net operating income for the nine months ended September 30, 2024 was $421.5 million, compared to $403.6 million for the same period in 2023, marking an increase of 4.4%.
Same-store rental income increased by approximately $23.3 million, or 4.6%, to $526.4 million for the nine months ended September 30, 2024.
Debt vs. Equity: How STAG Industrial, Inc. (STAG) Finances Its Growth
Debt vs. Equity: How STAG Industrial, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, STAG Industrial reported total debt of approximately $1.3 billion. This includes:
- Short-term debt: $256 million
- Long-term debt: $1.04 billion
Debt-to-Equity Ratio
The company's debt-to-equity ratio stands at approximately 1.00, which indicates that the company has a balanced approach to financing its operations compared to industry standards, which typically range from 0.50 to 1.50.
Recent Debt Issuances and Credit Ratings
On May 28, 2024, STAG Industrial issued $450 million in unsecured notes. The company maintains a credit rating of Baa2 from Moody's, indicating a moderate credit risk.
Refinancing Activity
In September 2024, the company entered a new credit agreement extending its unsecured credit facility to September 8, 2028, with an interest rate of SOFR + 0.875%.
Balance Between Debt Financing and Equity Funding
STAG Industrial balances its growth financing through both debt and equity. The company raised approximately $1.7 billion in equity from common stock sales over the past five years. This strategic mix allows it to capitalize on growth opportunities while managing financial risk.
| Type of Debt | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Unsecured Credit Facility | $256 | SOFR + 0.875% | September 8, 2028 |
| Unsecured Term Loan G | $300 | 1.80% | February 5, 2026 |
| Unsecured Term Loan A | $150 | 2.16% | March 15, 2027 |
| Unsecured Term Loan H | $187.5 | 3.35% | January 25, 2028 |
| Unsecured Term Loan I | $187.5 | 3.51% | January 25, 2028 |
| Unsecured Term Loan F | $200 | 2.96% | March 23, 2029 |
As of September 30, 2024, STAG Industrial had approximately $740 million available on its credit facility, providing significant liquidity to support its growth initiatives.
Assessing STAG Industrial, Inc. (STAG) Liquidity
Assessing STAG Industrial, Inc.'s Liquidity
Current and Quick Ratios
The current ratio for STAG Industrial, Inc. as of September 30, 2024, is approximately 3.09, indicating a strong liquidity position with current assets significantly exceeding current liabilities. The quick ratio, which excludes inventory from current assets, stands at 3.09 as well, reflecting the company’s robust ability to cover its short-term obligations without relying on inventory sales.
Analysis of Working Capital Trends
As of September 30, 2024, the working capital is approximately $810 million, with current assets totaling $1.1 billion and current liabilities of around $290 million. This trend shows a consistent increase in working capital compared to the previous year, supporting STAG's operational efficiency and liquidity management strategy.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, reveal the following:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) | Change |
|---|---|---|---|
| Net Cash Provided by Operating Activities | $355,363 | $299,506 | +18.6% |
| Net Cash Used in Investing Activities | ($390,521) | ($233,153) | +67.5% |
| Net Cash Provided by Financing Activities | $84,434 | ($81,112) | +204.1% |
Potential Liquidity Concerns or Strengths
Despite increased cash outflows due to significant investments in property acquisitions totaling approximately $404.9 million during the nine months ended September 30, 2024, the liquidity remains strong. The company has $70 million in cash and cash equivalents and $740 million available on its unsecured credit facility, ensuring it can meet both short-term and long-term liquidity needs effectively. The total principal outstanding debt is approximately $2.94 billion with a manageable maturity profile, further enhancing liquidity stability.
Is STAG Industrial, Inc. (STAG) Overvalued or Undervalued?
Valuation Analysis
When assessing the financial health of the company, key valuation metrics such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios provide insights into whether the stock is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is approximately 23.4. This reflects a slight increase from previous periods, indicating a premium valuation compared to industry peers, which average around 20.1.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.8, which signifies that the stock is trading at a higher valuation compared to its book value. The industry average P/B ratio is approximately 1.5.
Enterprise Value-to-EBITDA (EV/EBITDA)
The EV/EBITDA ratio is currently 16.5, suggesting that the company is valued higher than the industry average of 14.3. This indicates a premium valuation relative to earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated significantly. The stock opened at around $32.50 and has seen a high of $37.00 and a low of $28.00. Currently, the stock is trading at approximately $34.50, reflecting a 10.5% increase year-to-date.
Dividend Yield and Payout Ratios
The company has a dividend yield of 3.2% with a payout ratio of 70%. This indicates a commitment to returning value to shareholders while maintaining sufficient earnings to reinvest in operations.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a majority rating of Hold, with a few analysts suggesting Buy based on expected growth in rental income and overall market conditions. The average target price set by analysts is approximately $36.00.
| Metric | Value | Industry Average |
|---|---|---|
| P/E Ratio | 23.4 | 20.1 |
| P/B Ratio | 1.8 | 1.5 |
| EV/EBITDA | 16.5 | 14.3 |
| Current Stock Price | $34.50 | - |
| Dividend Yield | 3.2% | - |
| Payout Ratio | 70% | - |
| Analyst Consensus | Hold | - |
Key Risks Facing STAG Industrial, Inc. (STAG)
Key Risks Facing STAG Industrial, Inc.
STAG Industrial, Inc. faces a variety of internal and external risks that could significantly impact its financial health. Key risk factors include industry competition, regulatory changes, and market conditions.
Industry Competition
The industrial real estate sector has become increasingly competitive, with numerous players vying for market share. As of September 30, 2024, the company reported a 4.6% increase in same-store rental income, amounting to approximately $526.4 million compared to $503.1 million in the same period the previous year. This growth, while positive, indicates a competitive environment where maintaining and growing rental rates is challenging.
Regulatory Changes
Changes in zoning laws, property tax regulations, and environmental regulations can pose significant risks. The company had a loss on impairment of approximately $4.967 million in the nine months ended September 30, 2024. Regulatory compliance costs can escalate, affecting profitability and operational efficiency.
Market Conditions
Market volatility and economic downturns can impact occupancy rates and rental income. The company experienced a 16.5% decrease in net income for the three months ended September 30, 2024, amounting to $42.7 million compared to $51.2 million in the same period of 2023. Economic uncertainties can lead to tenant defaults, further straining cash flows.
Operational Risks
Operational risks include property management challenges and the potential for increased maintenance costs. The total operating revenue was approximately $526.5 million for the nine months ended September 30, 2024, reflecting a 4.6% increase. However, rising operational expenses, particularly in property management and maintenance, could diminish this revenue growth.
Financial Risks
Financial risks are heightened due to the company's reliance on variable-rate debt. As of September 30, 2024, the company had approximately $1.281 billion in variable-rate debt. Any increase in interest rates could adversely affect cash flows and the ability to make distributions to security holders.
Mitigation Strategies
The company employs various strategies to mitigate risks, including entering into interest rate swaps to manage interest rate exposure. As of September 30, 2024, the company had entered into interest rate swaps with an aggregate notional value of $200 million, fixing rates at 3.98% effective January 15, 2025. Additionally, ongoing evaluations of tenant creditworthiness help manage potential defaults.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Increased competition in the industrial real estate sector | 4.6% increase in same-store rental income |
| Regulatory Changes | Changes in zoning laws and property taxes | Loss on impairment of $4.967 million |
| Market Conditions | Economic downturns affecting occupancy rates | 16.5% decrease in net income to $42.7 million |
| Operational Risks | Challenges in property management and maintenance | Operating revenue of $526.5 million |
| Financial Risks | Reliance on variable-rate debt | $1.281 billion in variable-rate debt |
Future Growth Prospects for STAG Industrial, Inc. (STAG)
Future Growth Prospects for STAG Industrial, Inc.
Key Growth Drivers:
- In 2024, STAG Industrial expanded its portfolio with the acquisition of 26 buildings totaling approximately 4.5 million square feet.
- The company sold 18 buildings comprising about 3.3 million square feet.
- New leases executed during 2024 totaled 2.58 million square feet with an average rental rate of $5.66 per square foot.
Future Revenue Growth Projections and Earnings Estimates:
- Same store rental income for the nine months ended September 30, 2024, increased by $23.3 million, or 4.6%, to approximately $526.4 million.
- Net income for the nine months ended September 30, 2024, was $141.3 million, down from $154.6 million in the same period of 2023, representing an 8.6% decrease.
Strategic Initiatives and Partnerships:
- STAG Industrial secured $450 million in unsecured notes on May 28, 2024, which will be used to finance further acquisitions and developments.
- The company has a total immediate liquidity of approximately $810 million, which includes $70 million in cash and cash equivalents.
Competitive Advantages:
- As of September 30, 2024, the company enjoys a diversified tenant base, with the top 20 tenants contributing 57.9% of total annualized base rental revenue.
- The largest industry segment is Air Freight & Logistics, accounting for 11.3% of total rental revenue.
| Metrics | 2024 | 2023 | Change |
|---|---|---|---|
| Same Store Rental Income | $526.4 million | $503.1 million | $23.3 million (4.6%) |
| Net Income | $141.3 million | $154.6 million | ($13.3 million) (-8.6%) |
| New Leases Executed | 2.58 million sq ft | N/A | N/A |
| Total Cash Liquidity | $810 million | N/A | N/A |
Market Performance:
- As of September 30, 2024, the top markets by total annualized base rental revenue include Chicago, IL (7.4%), Greenville, SC (5.1%), and Pittsburgh, PA (4.1%).
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Article updated on 8 Nov 2024
Resources:
- STAG Industrial, Inc. (STAG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of STAG Industrial, Inc. (STAG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View STAG Industrial, Inc. (STAG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.