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On Tuesday, Citizens JMP maintained a Market Perform rating on Orion Office REIT Inc (NYSE: ONL), acknowledging the company’s progress since the beginning of the year but also noting the ongoing operational challenges it faces. The stock has declined significantly, with a -60.89% return over the past six months, according to InvestingPro data. The analyst from Citizens JMP pointed out that the expected reduction in cash flow due to upcoming move-outs has prompted the management to cut the dividend alongside the fourth-quarter earnings of 2024, underscoring the difficulties at hand.
The management of Orion Office REIT appears to be somewhat more optimistic about the fundamental outlook of the office sector and is aiming to transition towards assets that serve more specialized purposes, such as those used for technical or healthcare activities. However, this strategic shift is expected to take time and is not without risks associated with its execution. InvestingPro subscribers can access 14 additional key insights and a comprehensive Pro Research Report that provides deep analysis of ONL’s strategic positioning and financial health.
Orion Office REIT’s management provided a 2025 outlook with a forecasted funds from operations (FFO) per share in the range of $0.61 to $0.70. Based on the midpoint of this projection, the company’s shares are currently trading at approximately 2.5 times the forecasted FFO. The company trades at notably low multiples, with a Price-to-Book ratio of 0.12 and an EV/EBITDA of 7.3. The analyst has suggested that until there is greater clarity regarding the company’s forward earnings outlook, a discounted valuation seems justified, leading to the conclusion that the shares are presently fairly valued.
The reiteration of the Market Perform rating by Citizens JMP reflects a cautious stance towards Orion Office REIT’s stock, taking into account both the company’s efforts to improve and the potential headwinds it may encounter as it seeks to reposition its asset portfolio. While revenue declined 15.66% in the last twelve months, the company maintains a healthy current ratio of 2.39, indicating strong short-term liquidity. The company’s future performance and valuation will likely hinge on its ability to navigate the operational challenges and successfully implement its strategic repositioning. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued.
In other recent news, Orion Office Reit Inc (NYSE:ONL). reported its fourth-quarter 2024 earnings, revealing a net loss of $103 million, or $1.84 per share, on total revenues of $38.4 million. The company’s revenue exceeded forecasts of $37.1 million, although it was a decline from $43.8 million in Q4 2023. Orion is undergoing a strategic shift towards specialized property types, such as medical and lab facilities, to improve tenant stability amid a challenging financial landscape. Despite the revenue beat, the company’s stock price fell significantly following the earnings announcement, reflecting investor concerns over financial health. Leasing performance showed improvement, with 1.1 million square feet leased in 2024, marking a fourfold increase from the previous year. Analysts from Citizens Capital Markets raised questions about the timing of a potential rebound and the impact of asset sales on future revenue streams. Orion’s guidance for 2025 projects Core FFO between $0.61 and $0.70 per share, with expectations of flat to modest growth starting in 2027. The company remains optimistic about a rebound in 2026, driven by its leasing momentum and strategic property focus.
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