UBS lowers Federal Realty price target on growth concerns

UBS lowered its price target on Federal Realty Investment Trust (NYSE:FRT) to $103.00 from $118.00 on Monday, while maintaining a Neutral rating on the real estate investment trust stock. According to InvestingPro data, the company currently trades at a P/E ratio of 27.26x, with a market capitalization of $8.35 billion.

The firm cited Federal Realty’s share underperformance as a key factor, noting the company’s valuation has compressed to just a 2% premium over shopping center peers on a next-twelve-months funds from operations basis, well below its 5-year average premium of 24%. Recent performance shows revenue growth of 6.05% in the last twelve months.

UBS acknowledged Federal Realty possesses "one of the highest quality Retail REIT portfolios," featuring prime mixed-use centers and strong demographics, with an average household income of $115,900 within a five-minute drive of its properties. InvestingPro analysis highlights the company’s impressive 53-year streak of consecutive dividend payments, with a current yield of 4.62%.

The downward price target adjustment reflects investor concerns about Federal Realty’s projected 2026 FFO growth of 3.3%, which falls below the peer average of 3.9%, as well as the company’s exposure to the Washington D.C. market and its discretionary-focused portfolio during uncertain economic conditions.

Federal Realty is expected to provide more details about potential strategy changes during 2025 and at its anticipated Investor Day in November, where it may elaborate on plans for "accretive capital recycling" that UBS identified as a key narrative during the recent NAREIT conference.

In other recent news, Federal Realty Investment Trust reported its first-quarter earnings for 2025, posting an earnings per share (EPS) of $0.72, which slightly exceeded analysts’ expectations of $0.71. The company’s revenue also surpassed forecasts, reaching $309.15 million against a predicted $307.59 million. Alongside these financial results, Federal Realty raised its full-year Funds From Operations (FFO) per share guidance to a range of $7.11 to $7.23, indicating confidence in its ongoing operations. Additionally, at the company’s annual shareholder meeting, all proposed trustees were elected, and the compensation for named executive officers was approved by a significant majority. Grant Thornton LLP was ratified as the independent auditor for the fiscal year ending December 31, 2025. Federal Realty also announced an amendment to the severance agreement with its Chief Financial Officer, Daniel Guglielmone, ensuring a year of base salary and annual bonus if terminated without cause. This amendment was included in a regulatory filing with the SEC. These developments reflect Federal Realty’s strategic focus on maintaining robust financial health and effective governance.

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