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STORE Capital Corporation (NYSE:STOR ) Q2 2022 Earnings Conference Call August 4, 2022 12:00 PM ET Company Participants Megan McGrath - Investor Relations Mary Fedewa - President and Chief Executive Officer Sherry Rexroad - Chief Financial Officer Craig Barnett - Executive Vice President, Underwriting and Portfolio Management Tyler Maertz - Executive Vice President, Acquisitions Conference Call Participants Wes Golladay - Baird Linda Tsai - Jefferies Ronald Kamdem - Morgan Stanley Todd Thomas - KeyBanc Capital Markets John Massocca - Ladenburg Thalmann Connor Siversky - Berenberg Chris Lucas - Capital One Sheila McGrath - Evercore Operator Good morning and welcome to the STORE Capital Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.
Store Capital (STOR) delivered FFO and revenue surprises of 5.45% and 1.16%, respectively, for the quarter ended June 2022. Do the numbers hold clues to what lies ahead for the stock?
STORE Capital's (STOR) Q2 results are likely to reflect gains from an increase in the size of the real estate investment portfolio and improving fundamentals.
STORE Capital and Realty Income are both triple net lease REITs with very stable cash-flowing business models. While STOR's yield is ~140 basis points greater than O's, O boasts a higher credit rating, implying a lower risk profile.
STORE Capital is a high-quality net-lease REIT with stable revenue and AFFO per share growth metrics. Its embedded rent escalators and relatively low payout ratio also lend tremendous visibility. However, our analysis suggests that the market has de-rated STOR in July 2021, despite its solid underlying operating model. We believe it anticipated further normalization in growth moving ahead.
The dividend yield of STORE Capital has risen to a mouth-watering (and hence suspicious) level of 5.6%. It is not only above its long-term average by a whopping 23% but also near its peak level since IPO (when the 2020 COVID panic sale is excluded).
STOR is a high-quality net lease REIT with a portfolio of service-oriented tenants that are relatively immune to e-commerce. It's also maintained strong occupancy over the past 2 years, and has a long weighted average lease term of 13.3 years.
Inflation protection is built right into this type of real estate investment trust.
With the July screening, two new energy plays have shown up on the list since we started this screening. We also have two REITs that have shown up previously, but it has been at least a quarter since covering them.
STORE Capital is one of my favorite net lease REITs, and shares have sold off more than 20% YTD. This brought the valuation to a very attractive 12.2x price/FFO, a steep discount to its average multiple as well as the valuations of peers.