American Realty Capital Properties (ARCP) Stock Up After Meister Names it 'Best Idea'

NEW YORK (TheStreet) -- Shares of American Realty Capital Properties (ARCP) were up 3.02% to $8.86 in afternoon trading Wednesday, after activist investor Keith Meister of Corvex Management named the real estate investment trust his best idea for 2015, according to CNBC.

CNBC tweeted earlier today:

Speaking at the Delivering Alpha conference in New York City, Meister said he thinks the stock may be worth $13 per share, according to Bloomberg.

He sees upside of between 25% to 50%, calling the investment "bond-like risk with equity-like returns," CNBC reports.

Last year, American Realty Capital Properties was in hot water amid an accounting scandal that led to the resignation of three top executive members after disclosures that the accounting errors were intentionally concealed. 

"This company has done the right thing to repair itself," Meister said, Bloomberg reports.

Meister noted that he believes management has taken steps to increase accountability.

Corvex Management owns 7.8% of ARCP's shares.

Phoenix-based American Realty Capital Properties is a real estate investment trust that operates through two business segments.

Through the REI segment, the company acquires, owns and operates single-tenant, freestanding, commercial real estate properties.

The private capital management business Cole Capital is responsible for managing the affairs of four publicly registered, non-traded REITs.

Separately, TheStreet Ratings team rates AMERICAN RLTY CAP PPTY INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMERICAN RLTY CAP PPTY INC (ARCP) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself."

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

  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN RLTY CAP PPTY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for AMERICAN RLTY CAP PPTY INC is rather low; currently it is at 22.87%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, ARCP's net profit margin of -7.60% significantly underperformed when compared to the industry average.
  • ARCP's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 33.37%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • AMERICAN RLTY CAP PPTY INC reported significant earnings per share improvement 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 year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, AMERICAN RLTY CAP PPTY INC continued to lose money by earning -$1.44 versus -$2.44 in the prior year. This year, the market expects an improvement in earnings (-$0.06 versus -$1.44).
  • 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 89.7% when compared to the same quarter one year prior, rising from -$291.44 million to -$29.97 million.
  • You can view the full analysis from the report here: ARCP Ratings Report