COPT Defense Properties (CDP) AI Stock Analysis

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COPT Defense Properties

(NYSE:CDP)

72Outperform

COPT Defense Properties benefits from a strong financial recovery, robust earnings performance, and a reasonable valuation. Positive tenant retention and strategic investments drive optimism, yet challenges like decreased free cash flow and potential macroeconomic risks temper the outlook. The overall score reflects a solid but cautious investment profile.

Positive Factors

Development Opportunities

CDP's defense intelligence clusters will play an outsized role as the Federal Government looks to modernize national defense capabilities, expand its oversight and control of low-earth orbit, and support the next generation of cybersecurity development.

Financial Performance

Management expresses confidence in achieving a +4% FFO CAGR target through 2026, indicating strong growth expectations.

Leasing Activity

CDP completed 675k SF of new and renewal leasing in its operating portfolio during the quarter, which brought the FY leasing total to over 3.1M SF, 47.1% higher than 2023 and 17.1% higher than pre-pandemic levels.

Negative Factors

Construction Costs

Tariffs and supply chain issues could affect construction costs, posing a challenge for CDP's development projects.

Leasing Spreads

4Q leasing spreads were down (0.2%) on a cash basis.

Market Conditions

The potential relocation of US Space Command to Huntsville could provide CDP with leasing and development opportunities.

COPT Defense Properties (CDP) vs. S&P 500 (SPY)

Market Cap

$5.96B

Dividend Yield4.5%

Average Volume (3M)1.10M

Price to Earnings (P/E)21.6

Beta (1Y)0.50

Revenue Growth9.97%

EPS GrowthN/A

CountryUS

Employees427

SectorReal Estate

Sector Strength77

IndustryREIT - Office

Share Statistics

EPS (TTM)1.22

Shares Outstanding112,883,040

10 Day Avg. Volume997,969

30 Day Avg. Volume1,095,414

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)4.00

Price to Cash Flow (P/CF)7.50

P/FCF Ratio6.20

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$32.43

Price Target Upside22.66% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering7

COPT Defense Properties Business Overview & Revenue Model

Company DescriptionCOPT Defense Properties (CDP) is a real estate investment trust (REIT) that specializes in acquiring, managing, and developing properties primarily for the U.S. government and defense contractors. The company focuses on mission-critical facilities that support national security, defense, and information technology operations, providing secure and strategically located properties to its clients.

How the Company Makes MoneyCOPT Defense Properties generates revenue primarily through leasing its properties to government agencies and defense contractors. The company benefits from long-term lease agreements with stable, creditworthy tenants, ensuring a consistent income stream. Additionally, CDP may engage in property development and sales to optimize its portfolio and capitalize on market demand. Partnerships with government entities and major defense firms enhance its market position and contribute to its financial stability.

COPT Defense Properties Financial Statement Overview

Summary

COPT Defense Properties shows strong recovery in profitability with improved margins and a debt-free balance sheet. Revenue growth is modest, and free cash flow is declining, but overall financial stability is positive.

Income Statement

Very Positive

COPT Defense Properties has demonstrated solid revenue growth with a 9.96% increase in TTM revenue compared to the previous year. The company's gross profit margin improved to 49.83% in the TTM, reflecting strong operational efficiency. Net profit margin has turned positive in the TTM at 18.44%, a significant improvement from negative net income in the prior year. However, EBITDA margin slightly decreased to 43.93% in the TTM. Overall, the company's income statement reflects a strong recovery and growth trajectory.

Balance Sheet

Positive

The balance sheet shows a significant improvement with no debt in the TTM, a major shift from previous years, enhancing financial stability. The equity ratio is stable at 36.12%, indicating a balanced asset financing structure. The ROE improved significantly to 9.04% in the TTM, showcasing effective utilization of equity. However, the company's total assets have remained relatively flat, indicating potential limitations in asset growth.

Cash Flow

Positive

Free cash flow decreased by 30.88% in the TTM compared to the previous year, indicating a potential challenge in generating cash. The operating cash flow to net income ratio is strong at 1.65, demonstrating efficient cash earnings. However, free cash flow to net income ratio stands at 1.27, suggesting that free cash flow generation is slightly weaker relative to net income. Overall, cash flow management appears stable but with room for improvement in free cash flow growth.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
753.27M	684.98M	739.03M	664.45M	609.37M
	Gross Profit
744.03M	231.23M	220.41M	209.47M	199.72M
	EBIT
487.27M	188.46M	48.64M	168.70M	160.71M
	EBITDA
384.02M	337.49M	192.23M	320.44M	303.48M
	Net Income Common Stockholders
138.93M	-73.47M	173.03M	76.54M	97.37M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
38.28M	167.82M	12.34M	13.26M	18.37M
	Total Assets
4.25B	4.25B	4.26B	4.26B	4.08B
	Total Debt
2.44B	2.45B	2.26B	2.30B	2.12B
	Net Debt
2.40B	2.28B	2.25B	2.29B	2.10B
	Total Liabilities
2.69B	2.70B	2.51B	2.58B	2.36B
	Stockholders Equity
1.49B	1.48B	1.68B	1.62B	1.66B
Cash Flow		Free Cash Flow
299.61M	255.77M	229.45M	219.12M	205.67M
	Operating Cash Flow
330.95M	276.27M	265.82M	249.15M	238.42M
	Investing Cash Flow
-291.01M	-169.62M	-83.46M	-202.97M	-325.79M
	Financing Cash Flow
-169.67M	46.26M	-183.18M	-50.90M	91.27M

COPT Defense Properties Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price26.44

Price Trends

50DMA

26.57

Positive

100DMA

28.43

Negative

200DMA

28.76

Negative

Market Momentum

MACD

-0.15

Negative

RSI

52.29

Neutral

STOCH

84.52

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CDP, the sentiment is Neutral. The current price of 26.44 is above the 20-day moving average (MA) of 26.28, below the 50-day MA of 26.57, and below the 200-day MA of 28.76, indicating a neutral trend. The MACD of -0.15 indicates Negative momentum. The RSI at 52.29 is Neutral, neither overbought nor oversold. The STOCH value of 84.52 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for CDP.

COPT Defense Properties Risk Analysis

COPT Defense Properties disclosed 40 risk factors in its most recent earnings report. COPT Defense Properties reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

COPT Defense Properties Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CDP	72 Outperform	$5.96B	21.55	9.33%	4.50%	9.97%	―
CUZ	68 Neutral	$4.54B	90.59	0.98%	4.85%	6.71%	-45.29%
KRC	64 Neutral	$3.84B	18.17	3.87%	6.92%	0.53%	-1.38%
Sector *	59 Neutral	$2.72B	11.53	0.09%	8679.99%	5.56%	-16.50%
HIW	54 Neutral	$2.92B	28.84	4.27%	7.38%	-0.98%	-32.02%
DEI	52 Neutral	$2.77B	103.25	1.03%	5.62%	-3.33%	―
SLG	52 Neutral	$4.00B	663.10	-0.12%	6.03%	13.36%	94.82%

* Real Estate Sector Average

Performance Comparison

CDP

COPT Defense Properties

26.58

4.59

20.87%

CUZ

Cousins Properties

27.04

4.97

22.52%

DEI

Douglas Emmett

13.66

0.72

5.56%

HIW

Highwoods Properties

27.69

3.49

14.42%

KRC

Kilroy Realty

32.52

0.81

2.55%

SLG

SL Green Realty

53.00

3.29

6.62%

COPT Defense Properties Earnings Call Summary

Earnings Call Date: Feb 6, 2025 | % Change Since: -10.07% | Next Earnings Date: Apr 28, 2025

Earnings Call Sentiment Positive

The earnings call reflects a strong financial performance in 2024 with significant achievements in tenant retention and leasing activities, alongside strategic investments. However, concerns about potential delays in defense appropriations and increased financing costs create some challenges. Overall, the highlights outweigh the lowlights.

Highlights

Strong Financial Performance

FFO per share was $2.06, exceeding the midpoint of initial guidance by six cents, representing a 6.2% increase over 2023. Same property cash NOI increased by 9.1% year-over-year, the highest increase reported.

Record Tenant Retention

Achieved tenant retention of 86%, the highest annual level in over twenty years.

Successful Leasing Activities

Executed 500,000 square feet of vacancy leasing, exceeding the initial target by 25%, and achieved 45% vacancy leasing of total available inventory.

Strategic Investments

Committed $212 million to new investments, including first building acquisitions since 2015, in San Antonio and Columbia Gateway.

Growth Forecast for 2025

Establishing FFO per share guidance of $2.66 at the midpoint, implying a 3.5% growth over 2024.

Lowlights

Short-term Occupancy Reduction

Year-over-year occupancy ticked down sixty basis points due to strategic investments, with a deliberate short-term reduction.

Increased Financing Costs

Projected a one and a half cent increase in financing costs affecting 2025 performance.

Potential Delays in Defense Appropriations

Concerns about potential delays in defense budget approvals due to political factors, which might impact business operations.

Company Guidance

During COPT Defense Properties' fourth quarter and full year 2024 results conference call, several key metrics and guidance for 2025 were discussed. The company reported an adjusted FFO per share of $2.06 for 2024, exceeding initial guidance by six cents and marking a 6.2% increase over the previous year. This growth was driven by a 9.1% increase in same property cash NOI and a tenant retention rate of 86%, the highest in over two decades. The company executed 500,000 square feet of vacancy leasing, representing 45% of the year's initial vacant space. For 2025, COPT Defense Properties anticipates FFO per share to reach $2.66 at the midpoint, reflecting a 3.5% growth over 2024, despite expected increases in financing costs. The company plans to commit $212 million to new investments and has set a vacancy leasing target of 400,000 square feet. Additionally, a retention range of 75% to 85% is projected, with a focus on maintaining strong tenant relationships amidst a supportive defense spending environment under the current administration.

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.