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On Thursday, Barclays (LON:BARC) analyst Anthony F. Powell upgraded Kilroy Realty Corporation’s stock, trading on the New York Stock Exchange under the ticker (NYSE:KRC), from Equalweight to Overweight. The firm also increased the price target for the company’s shares from $42.00 to $44.00. According to InvestingPro data, KRC currently offers a substantial 6.25% dividend yield and has maintained dividend payments for 29 consecutive years.
Powell’s upgrade comes after a noted -15% year-to-date decline in Kilroy Realty’s stock value, which contrasts with the RMZ index’s +3% increase over the same period. This performance discrepancy, according to Powell, offers investors a chance to acquire shares of a high-quality real estate portfolio at a low valuation. InvestingPro analysis supports this view, indicating the stock is currently undervalued, with a price-to-book ratio of just 0.77 and strong liquidity demonstrated by a current ratio of 1.83.
The analyst acknowledged the challenges faced by Kilroy Realty but suggested that the market sentiment might be excessively pessimistic. At the time of the upgrade, Kilroy Realty’s shares were trading at a multiple of 8.7 times the firm’s estimated 2026 Funds From Operations (FFO) per share, which is lower than its peers that typically trade in the range of 10 to 18 times.
Additionally, when looking at the Funds Available for Distribution (FAD), Kilroy Realty’s shares were valued at 10.9 times, compared to a peer range of 12 to 26 times. With the shares closing at $34.54 on February 26, 2025, they implied a 9.0% capitalization rate based on Barclays’ 2025 Net Operating Income (NOI) estimate for the company.
Powell highlighted these valuation metrics as compelling, particularly in light of the potential for an acceleration in leasing activities. The upgrade reflects a more optimistic outlook on Kilroy Realty’s financial performance and market position, despite the current challenges it faces.
In other recent news, Kilroy Realty Corporation reported impressive financial results for the fourth quarter of 2024, significantly outperforming analyst expectations. The company announced earnings per share (EPS) of $0.50, surpassing the projected $0.32, and achieved revenue of $286.4 million, exceeding the anticipated $277.97 million. Kilroy Realty has set its 2025 funds from operations (FFO) guidance between $3.85 and $4.05 per share. Additionally, the company declared a regular quarterly dividend of $0.54 per share, scheduled for payment on April 9, 2025. Kilroy Realty is actively engaged in development projects, including two life science redevelopment initiatives totaling 100,000 square feet and a major development project estimated at $1.0 billion. The company continues to be recognized for its sustainability efforts, maintaining carbon-neutral operations since 2020 and receiving accolades for its sustainability initiatives. Kilroy Realty is also exploring potential land sales that could generate over $150 million in proceeds, while maintaining a focus on strategic investments and operational efficiencies.
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