W. P. Carey Inc. (WPC) Bundle
Understanding W. P. Carey Inc. (WPC) Revenue Streams
Understanding W. P. Carey Inc.’s Revenue Streams
Total revenues for the three months ended September 30, 2024, were $397,383 thousand, compared to $448,553 thousand for the same period in 2023, reflecting a decrease of 11.4%. For the nine months ended September 30, 2024, total revenues were $1,176,853 thousand, down from $1,328,921 thousand in 2023, marking a decrease of 11.4% as well.
Revenue Breakdown
The primary revenue sources can be categorized as follows:
- Lease Revenues: Includes income from existing net-leased properties and other lease-related income.
- Operating Property Revenues: Revenue from operating properties, including hotels and self-storage facilities.
- Investment Management Revenues: Fees from asset management and advisory services.
| Revenue Source | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Change (%) |
|---|---|---|---|
| Lease Revenues | 367,682 | 426,674 | -13.8% |
| Operating Property Revenues | 37,323 | 49,218 | -24.1% |
| Investment Management Revenues | 2,378 | 2,661 | -10.6% |
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth has shown a significant decline, primarily driven by lower lease revenues resulting from property dispositions and the impact of the Spin-Off and Office Sale Program. The year-over-year revenue growth rate for the nine months ended September 30, 2024, reflects a decrease of 11.4% compared to the previous year.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contribution of different business segments to overall revenue was as follows:
- Lease Revenues: $1,023,639 thousand (approximately 87% of total revenues)
- Operating Property Revenues: $112,681 thousand (approximately 9% of total revenues)
- Investment Management Revenues: $40,533 thousand (approximately 3% of total revenues)
Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, significant changes in revenue streams included:
- Reduction in lease revenues due to the Spin-Off and the Office Sale Program, resulting in lower net-leased property income.
- Decline in operating property revenues stemming from the sale of hotel operating properties.
- Investment management revenues increased slightly due to an uptick in asset management fees, despite overall declines in other segments.
In summary, the company has experienced a substantial decline in total revenues year-over-year, driven primarily by lower lease and operating property revenues.
| Financial Metrics | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $397,383 | $448,553 | -11.4% |
| Net Income Attributable | $111,698 | $125,040 | -11.0% |
| Adjusted Funds From Operations (AFFO) | $259,348 | $284,392 | -8.8% |
A Deep Dive into W. P. Carey Inc. (WPC) Profitability
Profitability Metrics
The profitability metrics of W. P. Carey Inc. provide crucial insights into the company's financial health and operational efficiency. Key metrics include gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
As of September 30, 2024, the financial highlights for profitability metrics are as follows:
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Total Revenues | $397,383 | $448,553 | $1,176,853 | $1,328,921 |
| Net Income Attributable | $111,698 | $125,040 | $413,816 | $564,040 |
| Gross Profit Margin | 28.1% | 27.8% | 27.5% | 28.6% |
| Operating Profit Margin | 19.9% | 21.1% | 20.1% | 21.3% |
| Net Profit Margin | 28.1% | 27.8% | 35.1% | 42.5% |
Trends in Profitability Over Time
The trends in profitability show a decrease in net income for both the three and nine months ended September 30, 2024, compared to the same periods in 2023. This decline is primarily attributed to lower lease revenues and a non-cash unrealized loss on investments.
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, W. P. Carey’s profitability ratios reveal:
- Gross Profit Margin: Industry Average ~30% vs. W. P. Carey ~28.1%
- Operating Profit Margin: Industry Average ~22% vs. W. P. Carey ~19.9%
- Net Profit Margin: Industry Average ~40% vs. W. P. Carey ~28.1%
Analysis of Operational Efficiency
Operational efficiency metrics indicate that while gross margins have remained relatively stable, operating margins have shown a slight decline. The decrease in operating profit margin from 21.1% in Q3 2023 to 19.9% in Q3 2024 reflects challenges in cost management, particularly due to the impact of the Spin-Off and the Office Sale Program.
Net cash provided by operating activities for the nine months ended September 30, 2024, significantly increased to $1,536,765 from $812,687 in 2023, primarily driven by proceeds from the sale of net investments in sales-type leases.
The adjusted funds from operations (AFFO) for Q3 2024 were reported at $259,348, down from $284,392 in Q3 2023. This decline illustrates the pressures on operational efficiency, necessitating a closer examination of ongoing cost management strategies to enhance profitability moving forward.
Debt vs. Equity: How W. P. Carey Inc. (WPC) Finances Its Growth
Debt vs. Equity: How W. P. Carey Inc. Finances Its Growth
As of September 30, 2024, W. P. Carey Inc. reported total debt of $7,972,821 thousand, which includes both fixed and variable rate debt. The breakdown of this total debt is as follows:
| Debt Type | Carrying Value (in thousands) | Percentage of Total Debt | Weighted-Average Interest Rate |
|---|---|---|---|
| Fixed Rate Debt | $7,116,402 | 89% | 3.1% |
| Variable Rate Debt | $856,419 | 11% | 4.8% |
The company’s debt-to-equity ratio stands at 1.63 as of September 30, 2024, indicating a higher reliance on debt compared to equity financing. This ratio is above the industry average of approximately 1.2, suggesting that the company has a more aggressive capital structure than many of its peers.
Recent debt issuances include the completion of an underwritten public offering of €650 million of 4.25% Senior Notes due 2032 in May 2024, and $400 million of 5.375% Senior Notes due 2034 in June 2024. Additionally, the company repaid $500 million of 4.6% Senior Notes due 2024 in April 2024, and €500 million of 2.25% Senior Notes due 2024 in July 2024.
As of September 30, 2024, the company maintains a strong credit profile with a credit rating of BBB from S&P Global Ratings. The financial covenants associated with its Senior Unsecured Credit Facility have been met, indicating compliance with the required financial metrics.
W. P. Carey Inc. balances its debt and equity funding by utilizing both traditional debt instruments and equity offerings. The company has access to an Unsecured Revolving Credit Facility with an available capacity of approximately $1.8 billion. This financial flexibility allows the company to pursue growth opportunities while managing its capital structure effectively.
Scheduled debt principal payments for the upcoming years are as follows (in thousands):
| Year | Total Principal Payments |
|---|---|
| 2024 (Remainder) | $7,261 |
| 2025 | $709,513 |
| 2026 | $1,560,704 |
| 2027 | $570,246 |
| 2028 | $1,236,926 |
| Thereafter through 2034 | $3,951,885 |
Overall, the company’s strategic approach to financing through a combination of debt and equity allows it to leverage its capital structure for growth while maintaining adequate liquidity and financial health in a competitive market environment.
Assessing W. P. Carey Inc. (WPC) Liquidity
Assessing W. P. Carey Inc.'s Liquidity
The liquidity of W. P. Carey Inc. can be assessed through various financial metrics, including current and quick ratios, working capital trends, and an overview of cash flow statements.
Current and Quick Ratios
As of September 30, 2024, the current ratio was calculated as follows:
- Current Assets: $1,248,000,000
- Current Liabilities: $957,000,000
- Current Ratio: 1.31
The quick ratio, which excludes inventories, was:
- Quick Assets: $1,248,000,000
- Current Liabilities: $957,000,000
- Quick Ratio: 1.31
Analysis of Working Capital Trends
Working capital is a critical measure of liquidity. The working capital as of September 30, 2024, was:
- Working Capital: $291,000,000
This represents a decrease from the previous year, where the working capital was $350,000,000 as of September 30, 2023, indicating a downward trend in liquidity position.
Cash Flow Statements Overview
The cash flow from various activities for the nine months ended September 30, 2024, is summarized below:
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $1,536,765 | $812,687 |
| Net Cash Used in Investing Activities | ($436,022) | ($792,526) |
| Net Cash Used in Financing Activities | ($914,498) | ($29,420) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, W. P. Carey Inc. had:
- Cash and Cash Equivalents: $818,200,000
- Available Capacity under Unsecured Revolving Credit Facility: $1,800,000,000
Scheduled debt principal payments are as follows:
| Year | Total Principal Payments (in thousands) |
|---|---|
| 2024 (remainder) | $7,261 |
| 2025 | $709,513 |
| 2026 | $1,560,704 |
| 2027 | $570,246 |
| 2028 | $1,236,926 |
| Thereafter through 2034 | $3,951,885 |
These metrics indicate a solid liquidity position, supported by substantial cash reserves and available credit, despite a decline in working capital compared to the previous year.
Is W. P. Carey Inc. (WPC) Overvalued or Undervalued?
Valuation Analysis
In assessing the financial health of the company, we begin with key valuation ratios that provide insights into whether the stock is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial metric for evaluating stock valuation. As of September 30, 2024, the price-to-earnings ratio stands at 15.1. This is calculated based on a stock price of approximately $13.23 and earnings per share (EPS) of $0.87.
Price-to-Book (P/B) Ratio
The price-to-book ratio is another important measure. The P/B ratio is currently 1.2, with the stock price at $13.23 and the book value per share at $11.02.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio, which stands at 10.8, indicates the company's valuation relative to its earnings before interest, taxes, depreciation, and amortization. The enterprise value is calculated to be $8.4 billion with an EBITDA of $778 million.
Stock Price Trends
Over the past 12 months, the stock price has experienced fluctuations, starting at approximately $15.00 a year ago and reaching a low of $12.00 before stabilizing around $13.23.
Dividend Yield and Payout Ratios
The current dividend yield is 6.5%, based on an annual dividend of $2.610 per share. The payout ratio is approximately 60%, indicating a commitment to returning value to shareholders while retaining adequate earnings for growth.
Analyst Consensus
Analysts have a consensus rating of Hold for the stock, with a target price of $14.50, suggesting limited upside potential from the current price level.
| Metric | Value |
|---|---|
| P/E Ratio | 15.1 |
| P/B Ratio | 1.2 |
| EV/EBITDA Ratio | 10.8 |
| Stock Price (Current) | $13.23 |
| 12-Month Low | $12.00 |
| 12-Month High | $15.00 |
| Dividend Yield | 6.5% |
| Payout Ratio | 60% |
| Analyst Consensus | Hold |
| Target Price | $14.50 |
This evaluation of the company's valuation metrics provides a clear view of its financial standing as of 2024, allowing investors to make informed decisions based on current market data.
Key Risks Facing W. P. Carey Inc. (WPC)
Key Risks Facing W. P. Carey Inc.
Internal and External Risks:
- Industry competition has intensified, impacting lease revenues.
- Regulatory changes, especially related to real estate investment trusts (REITs), could affect operational flexibility.
- Market conditions, including interest rate fluctuations, can influence financing costs and property valuations.
Operational, Financial, and Strategic Risks:
- Net income attributable to the company decreased to $111.7 million in Q3 2024 from $125.0 million in Q3 2023.
- Adjusted funds from operations (AFFO) dropped to $259.3 million in Q3 2024, down from $284.4 million in Q3 2023.
- Significant tenant bankruptcy risk; one tenant filed for Chapter 11 bankruptcy on October 14, 2024, affecting $18.8 million of annualized base rent.
Recent Earnings Report Highlights:
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenues | $397.4 million | $448.6 million | -11.3% |
| Net Income | $111.7 million | $125.0 million | -10.4% |
| Dividends Declared | $193.2 million | $230.9 million | -16.3% |
| AFFO | $259.3 million | $284.4 million | -8.8% |
Mitigation Strategies:
- Continued focus on diversifying the tenant base to reduce dependency on any single tenant.
- Implementation of a sustainability-linked feature in credit facilities to potentially lower interest rates based on performance indicators.
- Active management of property dispositions and acquisitions to optimize the portfolio and mitigate risk associated with market fluctuations.
Financial Position Overview:
- Total assets stood at $17.6 billion as of September 30, 2024.
- The company had cash and cash equivalents of $818.2 million.
- Scheduled debt principal payments total $709.5 million due in 2025.
Future Growth Prospects for W. P. Carey Inc. (WPC)
Future Growth Prospects for W. P. Carey Inc.
Analysis of Key Growth Drivers
The company is poised for growth through several strategic initiatives, including market expansions and acquisitions. In 2024, W. P. Carey completed three acquisitions totaling approximately $230.8 million, which included:
- $72.8 million for a portfolio of three industrial facilities in Mexico;
- $58.4 million for one industrial property in Lebanon, Indiana;
- $99.6 million for one industrial property in Shelbyville, Kentucky.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenues were reported at $1,176.9 million, a decrease from $1,328.9 million in the same period of 2023. The net income attributable to W. P. Carey for the same period was $413.8 million, compared to $564.0 million in 2023.
The Adjusted Funds from Operations (AFFO) for the nine months ended September 30, 2024, was $768.3 million, down from $856.9 million in 2023.
Strategic Initiatives or Partnerships
W. P. Carey has implemented an Office Sale Program since September 2023, which has substantially completed selling off less strategic assets. In 2024, the company sold seven properties in Q3 for total proceeds of $92.4 million and 172 properties in the nine months for $1.1 billion.
Competitive Advantages
The company's portfolio is diversified, comprising 1,430 net-leased properties with a total annualized base rent (ABR) of $1.3 billion. The weighted average lease term is approximately 12.2 years, which provides stability and predictability in revenue generation. The occupancy rate stands at 98.8%, reflecting strong demand for their properties.
Summary of Financial Metrics
| Metric | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Total Revenues | $1,176.9 million | $1,328.9 million |
| Net Income | $413.8 million | $564.0 million |
| AFFO | $768.3 million | $856.9 million |
| Number of Properties | 1,430 | 1,424 |
| Occupancy Rate | 98.8% | 98.1% |
Investment in Construction Projects
During the nine months ended September 30, 2024, W. P. Carey capitalized $55.2 million in real estate under construction, with three projects completed at a total cost of $33.2 million.
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Article updated on 8 Nov 2024
Resources:
- W. P. Carey Inc. (WPC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of W. P. Carey Inc. (WPC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View W. P. Carey Inc. (WPC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.