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Why Starwood Property Trust (STWD) Is Slipping After Hours

NEW YORK (TheStreet) -- Starwood Property Trust (STWD) is moving lower in extended trading after announcing a public offering of 22 million shares.

After the bell, shares had toppled 3% to $22.50.

The mortgage real estate investment trust said it will also grant underwriters a 30-day option to purchase up to an additional 3.3 million shares.

Greenwich, Conn.-based Starwood said in a statement that it intends to use net proceeds to "originate and purchase additional commercial mortgage loans and other target assets and investments."

The company may also use a portion for other general corporate purpose such as working capital and payment of liabilities.

Credit Suisse, Bank of America, Barclays Capital, Citigroup and Wells Fargo will act as joint book-running managers.

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TheStreet Ratings team rates STARWOOD PROPERTY TRUST INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate STARWOOD PROPERTY TRUST INC (STWD) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, growth in earnings per share, compelling growth in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • STWD's very impressive revenue growth greatly exceeded the industry average of 6.7%. Since the same quarter one year prior, revenues leaped by 110.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • STARWOOD PROPERTY TRUST INC has improved earnings per share by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, STARWOOD PROPERTY TRUST INC increased its bottom line by earning $1.82 versus $1.78 in the prior year. This year, the market expects an improvement in earnings ($2.15 versus $1.82).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 68.6% when compared to the same quarter one year prior, rising from $56.33 million to $94.97 million.
  • Net operating cash flow has significantly increased by 1662.19% to $601.46 million when compared to the same quarter last year. In addition, STARWOOD PROPERTY TRUST INC has also vastly surpassed the industry average cash flow growth rate of 11.12%.
  • 45.34% is the gross profit margin for STARWOOD PROPERTY TRUST INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, STWD's net profit margin of 49.97% significantly outperformed against the industry.
  • You can view the full analysis from the report here: STWD Ratings Report
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