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On Friday, Lexington Realty Trust (NYSE:LXP) retained its Market Perform rating from JMP Securities, as analyst Mitch Germain commented on the company’s recent progress and challenges ahead. Trading at $8.57 with a market capitalization of $2.5 billion, the REIT maintains a "Fair" overall financial health score according to InvestingPro analysis. Germain acknowledged the successful backfilling of a significant development project, noting its beneficial impact on earnings and leverage for the real estate investment trust (REIT).
Lexington Realty’s recent development, a project exceeding one million square feet, has been leased, which is expected to positively affect the company’s financials. The yield on this project surpasses initial projections, and the commencement of the lease reduces ongoing expenses. With a strong gross profit margin of 82.6% and maintaining dividend payments for 32 consecutive years, the REIT demonstrates operational resilience. However, Germain pointed out that Lexington Realty still faces hurdles, with over two million square feet of recent developments remaining unoccupied.
Despite these vacancies, the analyst sees potential in Lexington Realty’s operating portfolio, which is concentrated in the Sunbelt and Midwest regions. These areas could see growth due to a trend of manufacturing reshoring. Moreover, the portfolio’s focus on newer assets, with an average age of less than ten years, is seen as an undervalued aspect by the investment community. The company’s current 6.3% dividend yield and healthy current ratio of 1.54 suggest financial stability. Discover more insights about LXP’s financial health and growth potential with InvestingPro, which offers 8 additional exclusive tips for this stock.
Germain further highlighted that Lexington Realty’s stock is trading at a multiple that is roughly five turns lower than its peers, at mid-13 times its estimated 2025 funds from operations (FFO) per share. This valuation is in line with historical trends, suggesting that the stock is fairly valued at present.
In conclusion, while the analyst recognized the positive developments and potential advantages of Lexington Realty’s portfolio, the firm remains cautious. JMP Securities is awaiting further clarity on the lease-up of the remaining vacancies and the overall impact of policy changes on the industrial sector before altering its stance on the stock.
In other recent news, LXP Industrial Trust reported a strong performance in the first quarter of 2025, exceeding earnings expectations with an earnings per share (EPS) of $0.06, compared to the anticipated loss of $0.01. The company also surpassed revenue forecasts, reporting $87.89 million against the expected $78.85 million. LXP Industrial Trust maintained a high occupancy rate of 99.2% and reported a 5.2% growth in same-store net operating income. Meanwhile, KeyBanc Capital Markets maintained an Overweight rating on Lexington Realty Trust, setting a price target of $10.00, citing the company’s successful leasing of a speculative development facility in South Carolina. This lease agreement, which is expected to generate approximately $6.7 million in annual income, is seen as a positive step for Lexington Realty Trust’s future growth. KeyBanc also anticipates continued leasing activity at Lexington Realty’s other speculative development projects. These developments underscore the strategic moves both companies are making in the current economic climate.
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