Camden Property Trust CPT is well-poised to gain from the healthy renter demand amid favorable demographic trends. The company’s diversification efforts, focus on technology enhancements and strong development pipeline, backed by a healthy balance sheet position, augur well for long-term growth. However, the elevated supply of rental units and high interest rates add to its woes.

Last month, CPT reported fourth-quarter 2024 core funds from operations (FFO) per share of $1.73, beating the Zacks Consensus Estimate of $1.68. The quarterly results reflected higher same-property revenues and same-property net operating income (NOI). However, a lower effective blended lease rate undermined the results to an extent.

What’s Supporting CPT Stock?

Camden targets high-growth markets with high-quality resident profiles that enable the company to generate steady rental revenues. The markets are characterized by growing employment in high-wage sectors of the economy with in-migration trends. Per the company’s February operating update, the company is witnessing better occupancy and blended lease rate growth since the beginning of the first quarter of 2025 through Feb. 27 in comparison to the fourth quarter of 2024.

Camden has a diverse portfolio with a superior product mix of A/B quality properties in urban and suburban markets. Maintaining a diversified portfolio across urban and suburban markets and price points limits volatility and helps generate steady rental revenues.

Camden is leveraging technology, scale and organizational capabilities to drive margin expansion in its portfolio. Such efforts are likely to bring about operational efficiency and reduce costs, aiding NOI growth. During 2024, the company’s efforts to this effect generated an annual NOI amounting to $55 million.

Camden has a healthy balance sheet with ample liquidity, placing it well to capitalize on long-term growth opportunities. As of Dec. 31, 2024, the company had more than $1.0 billion in liquidity, including $21 million in cash and cash equivalents and around $1.0 billion available under its unsecured credit facility.

CPT has a well-laddered debt maturity schedule with a weighted average year to maturity of 6.2 years. In addition, in the fourth quarter of 2024, its annualized net debt to annualized adjusted EBITDAre was 3.8 times and unencumbered assets to NOI was 93.5%, providing scope for tapping the additional secured debt capital if required.

What’s Hurting CPT Stock?

The struggle to lure renters will persist, as supply volume is expected to remain elevated in some markets where the company operates, although management expects the same to recede gradually over time.

Also, Camden faces competition from other housing alternatives, such as rental apartments, condominiums and single-family homes. Such a competitive landscape limits the company’s ability to increase rent and occupancy, restricting its growth momentum to some extent.

Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and is a concern for Camden. Elevated rates imply a higher borrowing cost for the company, which would affect its ability to purchase or develop real estate. The company has a substantial debt burden, and its total debt as of Dec. 31, 2024, was approximately $3.49 billion.

Over the past six months, shares of this Zacks Rank #3 (Hold) company have declined 0.9% compared with the industry's downside of 5.9%. Analysts seem bearish on it, with the Zacks Consensus Estimate for 2025 FFO per share having been revised marginally southward over the past month to $6.76.

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Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Ventas VTR and Cousins Properties CUZ, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Ventas’ 2025 FFO per share has been raised marginally northward to 3.41 over the past week.

The Zacks Consensus Estimate for Cousins Properties’ 2025 FFO per share has been raised marginally upward to 2.76 over the past week.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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