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Vereit (VER) Moves 16% Higher on Acquisition News: Will This Strength Last?

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Vereit shares ended the last trading session 16% higher at $47.88. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 6.8% gain over the past four weeks.

This increased investor optimism can be attributed to the news of its acquisition by Realty Income Corporation (O - Free Report) in an all-stock transaction. Vereit shareholders will receive 0.705 shares of Realty Income stock for each Vereit share they own. Based on the closing stock price on Apr 28, the transaction values Vereit at nearly $48.40 per share, or around 17% premium to its closing price of $41.26.

The combined entity is poised to benefit from enhanced size, scale, diversification and synergies, particularly through accretive debt refinancing opportunities. Moreover, there are plans to spin off their office properties into a new REIT. The merger is expected to close in fourth-quarter 2021. However, as VER shoot up to end the last trading session at $47.88, a little lower than what Realty Income has offered, there is just a marginal upside in the stock.

Price and Consensus

Price Consensus Chart for VER

This real estate investment trust is expected to post quarterly funds from operations (FFO) of $0.78 per share in its upcoming report, which represents a year-over-year change of -7.1%. Revenues are expected to be $291.05 million, down 2.5% from the year-ago quarter.

While FFO and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in FFO estimate revisions and near-term stock price movements.

For Vereit, the consensus FFO per share estimate for the quarter has been revised marginally higher over the last 30 days to the current level. While a positive trend in FFO estimate revision usually translates into price appreciation, that doesn’t appear to be the case here.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>


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