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On Friday, Goldman Sachs analysts revised their stance on Kilroy Realty Corporation (NYSE: NYSE:KRC), downgrading the stock from "Buy" to "Neutral." Accompanying this rating change, the price target was also reduced to $36.00 from the previous $42.00. According to InvestingPro data, KRC currently trades at a price-to-book ratio of 0.76 and shows signs of being undervalued based on its Fair Value analysis. This adjustment reflects a reassessment of the factors that initially led to a positive outlook on the company’s stock.
The downgrade was prompted by several observations that diverged from initial expectations. Despite the high quality of Kilroy Realty’s office properties, occupancy rates have not only underperformed in comparison to other office REITs but also have not maintained a pricing advantage as anticipated. Additionally, the life science sector, which includes the KOP Phase 2 development, is currently experiencing a weak supply and demand setup, diminishing its previously perceived positive impact.Discover more insights about KRC and 1,400+ other stocks with InvestingPro’s comprehensive research reports, which transform complex Wall Street data into actionable intelligence.
Goldman Sachs also noted that Kilroy Realty’s investment grade (IG) balance sheet, previously thought to provide potential for external growth and to minimize risks associated with debt maturities, has not offered the expected advantages. However, InvestingPro data shows the company maintains strong liquidity with a current ratio of 1.83, and its liquid assets exceed short-term obligations. In fact, various instances of property level debt maturities have had favorable outcomes, which further undermines the original rationale for the "Buy" rating.
The analysts at Goldman Sachs have made minor updates to their model, forecasting a year-over-year core Funds From Operations (FFO) growth of negative 12% for 2025 and negative 3% for 2026. These projections fall 86 basis points and 23 basis points below the consensus estimates, respectively. Based on these revised forecasts, the analysts anticipate that near-term outperformance for Kilroy Realty will be challenging to achieve. Despite these challenges, the company maintains an impressive 29-year track record of consistent dividend payments, currently offering a 6.31% yield.
In other recent news, Kilroy Realty Corporation has announced a quarterly cash dividend of $0.54 per common share, scheduled for April 9, 2025. This dividend reflects an annualized rate of $2.16 per share. Barclays (LON:BARC) has upgraded Kilroy Realty’s stock rating from Equalweight to Overweight, raising the price target to $44.00. The upgrade was influenced by the current valuation metrics and the potential for increased leasing activities. Conversely, Citi has revised its price target for Kilroy Realty to $35.00 while maintaining a Neutral rating, following adjustments to the company’s financial model. Jefferies has initiated coverage with a Hold rating and a $34.00 price target, noting challenges related to occupancy rates and expiring leases. RBC Capital Markets has also lowered its price target to $39.00, maintaining a Sector Perform rating due to expected earnings volatility. These developments highlight the varied analyst perspectives on Kilroy Realty’s financial outlook and market position.
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