Goldman Sachs Cites Unfavorable Macro Trends In Education Realty Trust Downgrade
Education Realty Trust, Inc. (NYSE: EDR), a REIT focused on owning and managing collegiate housing communities located near university campuses, faces unfavorable macro trends ahead that puts an end to Goldman Sachs' bullish stance on the stock.
The Analyst
Goldman's Andrew Rosivach downgraded Education Realty Trust from Buy to Neutral with a price target lowered from $39 to $35.
The Thesis
One of the more notable macro trends working against the REIT company is the fact that the college age population of 18 to 24 has been falling since 2015 and is modeled to decline through 2020, Rosivach said in a note. Granted, a direct correlation between the population trend and Education Realty's stock performance is "unclear," the fact is recent financial performance suggests a correlation can be made. Specifically, from 2013 to 2015 the company showed a revenue growth rate of at least 3.8 percent but same community revenue growth has fallen to 2.3 percent in 2016 and 1.8 percent in 2017.
On the other hand, data from the National Student Clearinghouse Research Center found enrollment growth at universities with more than 10,000 students grew 80 basis points from 2017 to 2018, the analyst wrote. But even higher enrollment growth would be needed to support Education Realty's stock. The company estimates that in 2018, enrollment will grow 1.3 percent in its markets but will be outpaced by a 1.9 percent growth of new supply as a percentage of enrollment.
Price Action
Shares of Education Realty Trust were trading around $33.96 Wednesday afternoon.
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