Breaking Down Phillips Edison & Company, Inc. (PECO) Financial Health: Key Insights for Investors

You're looking for stability in a choppy market, and honestly, Phillips Edison & Company (PECO) is defintely delivering a textbook case for necessity-based retail, which is the immediate takeaway here. The company's Q3 2025 results, released in late October, weren't just a beat; they showed a real resilience, prompting management to raise their full-year guidance for Core Funds From Operations (Core FFO)-a key metric for REITs representing cash flow-to a range of $2.57 to $2.61 per share, which represents a solid 6.6% year-over-year growth at the midpoint. This strength is grounded in their operations: leased portfolio occupancy remains high at 97.6% as of September 30, 2025, and they're locking in future cash flow with record-high comparable renewal lease rent spreads of 23.2%, plus they've completed $376 million in gross acquisitions year-to-date. That's a powerful combination of high utilization and pricing power, but we still need to dig into the debt profile and the sustainability of that nearly 3.75% forward dividend yield to see if this grocery-anchored model can keep outrunning inflation and interest rate risks for the long haul.

Revenue Analysis

You need a clear picture of where Phillips Edison & Company, Inc. (PECO)'s money comes from, and honestly, the story is one of consistent strength in a necessity-based real estate sector. The direct takeaway is that their revenue is almost entirely tied to rental income from their core asset class-grocery-anchored shopping centers-and that income is growing at a solid clip, with Q3 2025 showing a 10.4% year-over-year increase.

For the trailing twelve months (TTM) ending September 30, 2025, Phillips Edison & Company generated a total revenue of $711.78 million. This top-line figure is up 10.73% from the previous TTM period, which is defintely a strong performance for a real estate investment trust (REIT). This growth rate shows the power of their focus on grocery-anchored neighborhood shopping centers, which tend to be recession-resistant. That's a great sign for stability.

Primary Revenue Source: Rental Income Dominance

Phillips Edison & Company's revenue streams are straightforward, dominated by rental income (or straight-line rent) from their portfolio of properties. As a REIT, their business model is simple: acquire and manage high-quality retail real estate. In the first quarter of 2025, for example, their total revenue was $178.31 million, and the vast majority of that-$174.18 million-came directly from rental incomes. This means rental income contributes around 97.7% of their total revenue, making it the single, crucial business segment.

• Rental Income: Core revenue driver, nearly 98% of total.
• Occupancy: High rate of 97.1% ensures steady cash flow.
• Segments: Grocery-anchored centers are the entire focus.

Year-over-Year Growth and Key Drivers

The near-term growth story is compelling. Phillips Edison & Company reported Q3 2025 revenue of $182.67 million, which beat analyst consensus estimates. Here's the quick math: that $182.67 million is a 10.4% jump compared to the same quarter last year. This isn't just inflation-driven rent bumps; it's a sign of real demand and effective management.

The significant change driving this revenue growth is the pricing power Phillips Edison & Company is seeing in its leasing activity. In Q3 2025, the company executed comparable renewal leases at a record-high rent spread of 23.2%. Plus, comparable new leases were signed at a rent spread of 24.5%. These are huge numbers, showing that tenants are willing to pay substantially more to be in their grocery-anchored centers, which is a clear opportunity for investors. You can read more about this in our full analysis: Breaking Down Phillips Edison & Company, Inc. (PECO) Financial Health: Key Insights for Investors.

What this estimate hides is the potential impact of rising interest expenses, which increased by 10% in Q1 2025. So, while the top line is strong, you still need to watch how much of that rental income growth translates to the bottom line after debt servicing. Still, the underlying demand is rock solid.

Profitability Metrics

You want to know if Phillips Edison & Company, Inc. (PECO) is making money efficiently, and the quick answer is yes, their profitability is strong and improving, especially when you look past the standard REIT metrics like Funds From Operations (FFO).

The latest results for the third quarter of 2025 (Q3 2025) show Phillips Edison & Company is translating its robust leasing activity into significant bottom-line growth. Their Q3 2025 Net Income attributable to stockholders was $24.7 million on revenue of $182.67 million, which translates to a Net Profit Margin of about 13.52% for the quarter. This is a dramatic jump, as the Net Income more than doubled from the $11.6 million reported in Q3 2024.

Here's the quick math on their core profitability ratios from the latest reporting period:

• Gross Margin: 71.30% (Q3 2025) [cite: 10 in step 1]
• Operating Margin: Approx. 24.21% (Q2 2025) [cite: 12 in step 1]
• Net Profit Margin: Approx. 13.52% (Q3 2025)

The Gross Margin of 71.30% is a solid indicator of high operational efficiency in managing property-level expenses, which is the cost of goods sold for a REIT. This margin is slightly lower than some single-tenant net lease peers like NetSTREIT, which reported a Gross Margin of 89.95% in a recent period, but that difference is expected because Phillips Edison & Company operates a multi-tenant model that includes more property management and maintenance costs. Still, a 71% margin is defintely healthy for a multi-tenant, grocery-anchored platform. [cite: 10 in step 1, 7 in step 2]

When we look at operational efficiency, the Q2 2025 Operating Margin was around 24.21%. This is below the broader REIT industry average of 29.13% for TTM (Trailing Twelve Months), which tells you that while the property operations are efficient (high Gross Margin), the company's overhead-like corporate general and administrative expenses-is taking a larger slice of revenue than the average REIT. [cite: 12 in step 1, 9 in step 2] The strong 3.3% growth in same-center Net Operating Income (NOI) in Q3 2025, driven by record-high renewal rent spreads of 23.2%, shows their core real estate business is performing exceptionally well, but corporate cost management is the area to keep an eye on to close that operating margin gap.

The trend in net profitability is the real story here. The Q3 2025 Net Income of $24.7 million represents a year-over-year growth of over 112% from Q3 2024. This growth is a clear signal that Phillips Edison & Company is successfully translating strong tenant demand and high occupancy (97.6% in Q3 2025) into shareholder value. The focus on necessity-based, grocery-anchored centers gives them a defensive moat, leading to stable, recurring rental income that supports this upward trend. To dive deeper into the strategic context of these numbers, you can check out the full post here: Breaking Down Phillips Edison & Company, Inc. (PECO) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

You need a clear picture of how Phillips Edison & Company, Inc. (PECO) funds its growth, because a REIT's capital structure dictates its risk profile and its ability to keep paying you dividends. The direct takeaway is that Phillips Edison & Company, Inc. maintains a measured, long-term debt strategy, with a Debt-to-Equity ratio of 1.05 as of Q3 2025, which is a manageable level for a grocery-anchored Real Estate Investment Trust (REIT).

Phillips Edison & Company, Inc. relies heavily on long-term, fixed-rate debt to finance its portfolio of grocery-anchored centers. This is a deliberate, conservative approach designed to lock in costs and mitigate interest rate risk. As of September 30, 2025, the company's total liabilities stood at approximately $2.68 billion, with the vast majority being long-term debt. Short-term debt to total capital is effectively 0.00%, which is a strong indicator of minimal near-term refinancing pressure. This structure means they've secured their capital for the long haul.

The company's primary leverage metric, the Debt-to-Equity ratio, was reported at 1.05 for the third quarter of 2025. To be fair, this is a bit higher than the net debt to equity ratio you might calculate using market capitalization, but it reflects the book value leverage. For context, the broader REIT industry's leverage ratio (debt-to-market assets) was around 32.9% in Q3 2025. Phillips Edison & Company, Inc.'s debt-to-total assets ratio is close to 39.07% ($2.68B in liabilities / $6.86B in assets), which is slightly more leveraged than the industry average, but still within a responsible range for a REIT focused on necessity-based retail.

Phillips Edison & Company, Inc. has been very active in managing its debt profile to ensure stability and liquidity. Here's the quick math on their recent activity:

• Fixed-Rate Debt: A substantial 95.3% of the company's total debt was fixed-rate as of September 30, 2025. This is a huge shield against the volatile interest rate environment.
• Weighted-Average Cost: The weighted-average interest rate on all outstanding debt was a favorable 4.4%.
• 2025 Issuance: In Q2 2025, the company completed a $350 million bond offering with a 5.25% coupon, maturing in 2032. This was a smart move to match-fund property acquisitions and replenish liquidity.
• Credit Facility: The company extended its $1.0 billion revolving credit facility, pushing its maturity out to January 9, 2029. As of Q3 2025, they had $970.8 million of borrowing capacity available on this facility.

The company's financial policy aims for a net debt to annualized adjusted EBITDAre ratio of 5.5x or below on a long-term basis. As of September 30, 2025, they were comfortably within this target at 5.3x. This ratio is the one the credit rating agencies, like S&P Global Ratings (which affirms a 'BBB-' issuer credit rating with a positive outlook), watch closely. Management is using a leverage-neutral approach to fund acquisitions, meaning they balance debt financing with asset sales or equity to keep the ratio steady. They are committed to being a 'repeat issuer in the long-term bond market' for growth, but their guidance for the remainder of 2025 does not assume any new equity issuance. This signals a preference for debt and retained cash flow over diluting shareholders in the near term. For more on the strategic direction this financing supports, you should review the Mission Statement, Vision, & Core Values of Phillips Edison & Company, Inc. (PECO).

Liquidity and Solvency

For a Real Estate Investment Trust (REIT) like Phillips Edison & Company, Inc. (PECO), liquidity is less about a high cash balance and more about access to capital. You need to look past the traditional metrics, which often look scary for a REIT, to see the real picture.

The standard liquidity ratios for Phillips Edison & Company, Inc. (PECO) as of September 30, 2025, are defintely low, which is typical for the sector. The Current Ratio (current assets divided by current liabilities) and the Quick Ratio (a stricter test, excluding inventory) both stood at approximately 0.19. This means for every dollar of short-term debt, the company only holds about 19 cents in near-term assets to cover it. That's a negative working capital position.

Here's the quick math on that negative working capital: a REIT's balance sheet is dominated by long-term, illiquid assets-the grocery-anchored shopping centers-and its current liabilities often include large, non-cash items like deferred revenue and accrued expenses. So, the working capital trend is consistently negative, but this doesn't signal immediate distress. The real strength lies in their ability to generate cash from operations and access their credit line. One clean one-liner: Cash flow is king when the current ratio is low.

The true measure of Phillips Edison & Company, Inc.'s liquidity is its total available capacity. As of September 30, 2025, the company reported total liquidity of approximately $977 million. This is a critical strength, comprised of two main components:

• Cash, cash equivalents, and restricted cash: $5.8 million
• Available borrowing capacity on its revolving credit facility: $970.8 million

This massive, readily available credit capacity is what you use to pay for short-term needs and fund acquisitions. It's the safety net, plus the growth engine.

Cash Flow Statement Overview

The cash flow statement for the nine months ended September 30, 2025, tells a clear story of a growing REIT. Phillips Edison & Company, Inc. is successfully generating cash from its core property operations and using debt to fund its expansion, which is the standard playbook for a healthy REIT. The net cash flows break down like this:

Operating cash flow (CFO) is robust at $252.09 million, showing the underlying real estate portfolio is highly profitable and stable. The negative cash flow from investing activities (CFI) of -$375.31 million is not a red flag; it simply reflects the company's strategy of using capital to acquire new properties, like the $20.9 million in assets acquired through joint ventures during that period. This is how a REIT grows its asset base and future rental income.

The positive cash flow from financing activities (CFF) of $120.39 million shows Phillips Edison & Company, Inc. is tapping the debt markets to fund this expansion, which is fine, but you must monitor the cost of that debt. What this estimate hides is the potential impact of rising interest rates on future financing costs, but their weighted-average interest rate on outstanding debt was a manageable 4.4% as of Q3 2025, with 95.3% of their total debt being fixed-rate. This fixed-rate structure provides a solid hedge against near-term rate hikes, which is a significant strength.

To dive deeper into the full financial picture, you can check out the rest of the analysis here: Breaking Down Phillips Edison & Company, Inc. (PECO) Financial Health: Key Insights for Investors.

Next step: Portfolio Manager: Assess the impact of a 100 basis point rise in their average floating-rate debt portion on the next quarter's interest expense by Friday.

Valuation Analysis

You want to know if Phillips Edison & Company, Inc. (PECO) is a buy, a hold, or a sell right now. The quick answer is that the market sees it as fairly valued, leaning toward a Hold, but with a potential upside based on analyst price targets. Its traditional Price-to-Earnings (P/E) ratio looks extremely high, but for a real estate investment trust (REIT), the Price/FFO (Funds From Operations) multiple tells a more defintely accurate story.

Looking at the trailing twelve months (TTM) data as of November 2025, the standard P/E ratio for Phillips Edison & Company, Inc. sits at a high 52.48, which would signal overvaluation in almost any other sector. However, the key metric for a REIT is the Price/FFO ratio, which is currently a more reasonable 13.82. This FFO multiple suggests the stock is trading in line with its cash-flow generating peers. Plus, the Enterprise Value-to-EBITDA (EV/EBITDA) is 16.28, and the Price-to-Book (P/B) ratio is 1.91, both of which are common for a high-quality retail REIT.

The stock has had a rougher run over the last year. Over the 12 months leading up to November 2025, Phillips Edison & Company, Inc.'s stock price decreased by about 10.56%. The price traded in a wide range, hitting a 52-week high of $40.12 in late November 2024 and a 52-week low of $32.40 in April 2025. The year-to-date (YTD) return is a negative 7.50%, which shows the stock hasn't yet recovered its early-year losses.

For income-focused investors, the dividend picture is mixed but improving. The stock offers a solid dividend yield of approximately 3.75% based on an annualized dividend of $1.30 per share. The TTM payout ratio based on earnings is a high 196.97%, which looks unsustainable on its face. But, what this estimate hides is that REITs are judged on FFO, and analysts project the payout ratio based on next year's earnings to drop to a much more sustainable 48.51%.

Wall Street's professional view is cautious but not bearish. The consensus analyst rating is a Hold, with five firms rating it a Hold and three recommending a Buy among the eight covering the stock. The average 12-month price target is $38.86. This target suggests an upside from the current price, but it's not a screaming Buy signal. So, if you're looking for a deep dive on who is buying, you should read Exploring Phillips Edison & Company, Inc. (PECO) Investor Profile: Who's Buying and Why?

• Average 12-Month Target: $38.86
• Consensus Rating: Hold
• Upside potential is limited, but the dividend is secure.

Risk Factors

You're looking at Phillips Edison & Company, Inc. (PECO) and seeing strong 2025 performance, but a seasoned analyst knows to map the risks that could derail that trajectory. The direct takeaway? PECO's core business is defensively positioned, but its financial structure carries some notable leverage risks that demand close attention, especially in a higher-for-longer interest rate environment.

The company's strategy of focusing on grocery-anchored neighborhood shopping centers-where 70% of its Annual Base Rent (ABR) comes from necessity-based goods and services-is a major hedge against external shocks. Still, no REIT is immune to macroeconomic and operational pressures.

External and Market Risks

The biggest external risk is the broader U.S. economic stability and the lingering threat of persistent inflation. While PECO's necessity-based tenants are resilient, a severe economic downturn or a major shift to digital shopping could still dampen occupancy and earnings. Management has highlighted broader market concerns, including tariffs, but asserts that bad debt remains well within their guidance range. Another risk is the competitive acquisition market, which could affect future margins as the company pursues its external growth strategy.

Honestly, the grocery-anchored model is defintely a strong shield against a retail apocalypse. You can find a deeper dive into their tenant base and strategy here: Exploring Phillips Edison & Company, Inc. (PECO) Investor Profile: Who's Buying and Why?

Financial and Operational Risks

The most critical risks are financial, specifically around leverage and the cost of debt. While PECO has a strong balance sheet for the sector, with approximately $977 million of liquidity as of September 30, 2025, the debt metrics are what analysts watch closely. The near-term headwind of stabilized interest rates is expected to persist, even though the company has no meaningful debt maturities until 2027.

Here's the quick math on the leverage picture from the Q3 2025 filings:

• Net Debt to Adjusted EBITDAR: This key metric stood at 5.3x as of September 30, 2025.
• Debt-to-Equity Ratio: This sits at 1.1, indicating a reliance on debt financing.
• Interest Coverage Ratio (ICR): At 1.79, this is on the lower side, raising concerns about the company's ability to comfortably meet its interest obligations.

What this estimate hides is the Altman Z-Score, which, at 0.82, technically places the company in the distress zone, suggesting a potential risk of bankruptcy within the next two years, according to that specific model. This is a model-driven red flag, not a certainty, but it underscores the need for disciplined capital allocation.

Mitigation Strategies and Financial Strength

Management is not sitting still; they have clear plans to mitigate these risks. The core strategy is portfolio recycling, which means selling non-core assets to fund growth and reduce debt. PECO plans to sell between $50 million and $100 million of assets in 2025. Plus, the grocery-anchored focus means that 85% of tenants have low tariff risk exposure, which is a structural advantage over many retail REIT peers.

The company's strong operational performance in 2025 is a key mitigation factor, driving the improved outlook. They are using internal strength to manage the financial risks.

Finance: Track the Net Debt to Adjusted EBITDAR ratio next quarter; it needs to trend down from 5.3x to ease leverage concerns.

Growth Opportunities

You want to know where Phillips Edison & Company, Inc. (PECO) is going next, and the answer is simple: more grocery-anchored centers, funded by smart asset recycling and a deep development pipeline. The core strategy is working, so management is doubling down on necessity-based retail (Real Estate Investment Trust, or REIT, jargon for properties people must visit).

This focus on necessity-based retail is the primary growth engine. About 70% of Phillips Edison & Company's Annual Base Rent (ABR) comes from tenants selling essential goods and services, which makes the portfolio incredibly resilient, even when the macro markets get nervous about the consumer. That's a defintely strong competitive advantage in a volatile economy.

Future Revenue and Earnings Estimates

The numbers for the 2025 fiscal year reflect this strength, with management raising its guidance following strong Q3 2025 results. Here's the quick math on the expected growth, which is a key driver for your total shareholder return (TSR):

• Full-year 2025 revenue is projected to hit around $715.59 million, representing an estimated year-over-year increase of 8.19%.
• The midpoint of the increased full-year Core FFO (Funds From Operations) per share guidance represents a 6.6% growth over 2024.
• Same-Center Net Operating Income (NOI) growth is targeted for a solid 3.1% to 3.6% range, with a midpoint of 3.35%.

This consistent, mid-single-digit growth in Core FFO per share is what you want to see from a quality REIT. It's predictable income combined with strong earnings growth.

Key Growth Drivers: Acquisition and Development

Phillips Edison & Company isn't just relying on existing properties. They are actively expanding the portfolio through disciplined acquisitions and internal development, a strategy known as external growth. They are meeting their full-year gross acquisition guidance of $350 million to $450 million, having already completed $376 million in year-to-date gross acquisitions at their share through Q3 2025.

The company is also focused on portfolio recycling, which means selling off lower-performing assets to fund higher-return projects. They plan to sell between $50 million and $100 million of assets in 2025, strategically swapping out lower-Internal Rate of Return (IRR) properties for higher-IRR ones.

Plus, the internal development pipeline is a huge opportunity. They have 22 projects under active construction, with an estimated total investment of $75.9 million. These projects are forecast to generate average estimated yields between 9% and 12%, which is highly accretive (meaning it adds to earnings immediately).

Competitive Advantages and Leasing Power

The company's competitive advantage is simple: location and tenant mix. Their 303 wholly-owned properties, totaling approximately 34.0 million square feet, are prime grocery-anchored centers. This focus drives exceptional leasing power, which translates directly into higher NOI.

Look at the leasing spreads (the difference between the rent on a new lease versus the old one):

A 29.5% spread on new leases is phenomenal, showing strong retailer demand for their spaces. Same-center leased occupancy remains high at 97.9% as of September 30, 2025, which gives management pricing power. This operational strength, coupled with approximately $977 million of total liquidity, means they have the financial capacity to meet their growth targets without relying on equity issuance for the remainder of 2025. You can read more about the company's financial stability in Breaking Down Phillips Edison & Company, Inc. (PECO) Financial Health: Key Insights for Investors.