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On Tuesday, BTIG analyst Thomas Catherwood maintained a Neutral rating on shares of Kilroy Realty Corporation (NYSE:KRC), following the company’s release of its fourth-quarter 2024 financial results. Kilroy Realty reported funds from operations (FFO) per share of $1.20, which surpassed both BTIG’s estimate and the consensus by $0.17. However, the company’s forecast for fiscal year 2025 came in slightly below expectations, with a guidance midpoint of $3.95, $0.17 short of the consensus. According to InvestingPro data, KRC currently trades at a P/E ratio of 21.87x and offers a substantial dividend yield of 5.87%, having maintained dividend payments for 28 consecutive years.
The fourth-quarter performance presented a mix of positive and negative developments for Kilroy Realty. Notably, net operating income (NOI) significantly exceeded BTIG’s projections, and the company experienced its strongest leasing activity in over five years. Despite these achievements, challenges remain, such as declining occupancy rates, unleased active developments, and a 2025 guidance that implies tenant retention may not reach the 30% level achieved in 2024. InvestingPro analysis shows the company maintains a healthy current ratio of 1.39, with liquid assets exceeding short-term obligations, though two analysts have recently revised their earnings expectations downward.
Catherwood expressed concerns about the company’s occupancy outlook. Even with a relatively small percentage of leases set to expire in 2025, which amounts to approximately 716,000 square feet or 5.2% of total square footage and 3.8% of annual base rent (ABR), occupancy is still expected to decline. This trend could pose significant earnings challenges for Kilroy Realty in 2026 when a more substantial portion of leases, over 1.9 million square feet (14.0% of total square footage and 11.8% of ABR), are due to expire.
During the upcoming earnings call, BTIG anticipates further details regarding the pace of move-outs in 2024, leasing activity in early 2025, and general expectations for office leasing trends on the West Coast, particularly among major tech tenants. In light of the recent financial disclosures and the mixed results, BTIG’s estimates for Kilroy Realty are currently under review.
In other recent news, Kilroy Realty has been the subject of diverse analyst perspectives. Mizuho (NYSE:MFG) Securities downgraded the real estate investment trust’s stock rating from Outperform to Neutral, citing sluggish office market fundamentals and limited leasing activity at Kilroy’s Oyster Point project. The firm revised its price target for Kilroy Realty to $43, down from $45, and expressed concerns that consensus estimates for Kilroy Realty’s funds from operations (FFO) might be overly optimistic.
On the other hand, JPMorgan upgraded Kilroy Realty from a Neutral rating to Overweight, anticipating an upturn in leasing activities by 2025. The firm raised its price target to $49, up from $45, expressing optimism about the potential for increased leasing at Kilroy’s KOP II development project and a boost in the company’s core markets.
Meanwhile, Scotiabank (TSX:BNS) downgraded Kilroy Realty from Sector Perform to Sector Underperform, setting a price target of $38. The bank expressed concerns about the company’s occupancy rates in 2025 and 2026 and the potential impact on annual funds from operations per share. Despite these recent developments, it is important to note that these are analyst projections and may not reflect the actual future performance of Kilroy Realty.
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