ALEX: Shopping Centers And Buyout Deal Will Offset REIT Fund Flow Headwinds

Analysts have modestly reduced their price target on Alexander & Baldwin by about $1 to approximately $21 per share. This reflects slightly lower fair value and profit margin expectations, even as projected revenue declines appear less severe and long term earnings multiples compress amid ongoing REIT fund flow headwinds.

Analyst Commentary

Analysts are refining their views on Alexander & Baldwin as 2026 comes into clearer focus, balancing solid performance in core assets with softer trends in certain segments and persistent REIT-specific headwinds.

Bullish Takeaways

• Bullish analysts highlight that shopping center fundamentals appear firm through 2026, supporting confidence in stable cash flows and helping to underpin the current valuation despite a lower price target.
• Pre earnings checks for the ongoing quarter are largely tracking expectations, reinforcing the view that management execution remains consistent even as the macro backdrop for REITs is less favorable.
• Resilient performance in retail oriented properties is seen as a strategic strength that could enable the company to defend or gradually expand net operating income, offering medium term growth visibility.
• Some see the recent share price pressure as more a function of sector wide fund flows than company specific issues, suggesting potential upside if investor attention rotates back to income oriented real estate names.

Bearish Takeaways

• Bearish analysts point to weakening fundamentals in the apartment portfolio, which has led to more cautious earnings assumptions for 2026 and limits near term growth in funds from operations.
• Ongoing REIT fund flow headwinds, as capital chases higher growth themes like AI, are expected to continue weighing on the stock’s valuation multiple, even with relatively steady property level performance.
• Compressed long term earnings multiples reflect concern that any recovery in the company’s share price could be gradual, given the broader sector’s underperformance versus high growth equities.
• There is caution that, while shopping centers are firm, softness in apartments and a still challenging capital markets environment could constrain the pace of external growth or capital recycling opportunities.

What's in the News

• Investor group led by MW Group, Blackstone Real Estate and DivcoWest agreed to acquire Alexander & Baldwin for $21.20 per share in an all cash deal valuing the company at approximately $2.3 billion, with closing targeted for the first quarter of 2026 and A&B to become a private company headquartered in Honolulu (M&A Transaction Announcements, Legal Structure Changes).
• The merger agreement includes a $155.3 million termination fee on the buy side and a $50.5 million termination fee on the sell side, underscoring the binding nature of the transaction terms (M&A Transaction Announcements).
• Alexander & Baldwin raised its 2025 earnings guidance, now expecting diluted EPS of $0.95 to $1.00 versus prior guidance of $0.91 to $0.96, reflecting improved operating expectations (Corporate Guidance: Raised).
• The Board declared a fourth quarter 2025 dividend of $0.35 per share, payable January 8, 2026, to shareholders of record on December 19, 2025 (Dividend Increases).
• The company authorized a share repurchase program of up to $100 million running through December 31, 2027, although only 5,830 shares, or 0.008018 percent of shares, had been repurchased as of the third quarter of 2025 (Buyback Transaction Announcements; Buyback Tranche Update).

Valuation Changes

• The fair value estimate has fallen slightly from about $21.25 to roughly $20.12 per share, implying a modestly lower intrinsic value assessment.
• The discount rate has edged down marginally from approximately 7.21 percent to about 7.11 percent, reflecting a slightly lower required return in the valuation model.
• The revenue growth outlook has improved meaningfully, with the projected decline easing from around minus 9.82 percent to approximately minus 3.34 percent, indicating less severe expected top line pressure.
• The net profit margin assumption has decreased modestly from about 23.27 percent to roughly 21.36 percent, signaling slightly lower expected profitability on future revenues.
• The future P/E multiple has compressed from roughly 47.0x to about 40.8x, pointing to a lower valuation multiple being applied to projected earnings.