On Wednesday, KeyBanc Capital Markets sustained its positive outlook on shares of LXP Industrial Trust (NYSE:LXP), a real estate investment trust specializing in industrial properties. The firm reiterated its Overweight rating on the company's stock, maintaining a price target of $11.00.
The affirmation of the rating follows a recent meeting with LXP Industrial Trust's management, including CEO Will Eglin and EVP of Capital Markets and Incoming CFO Nathan Brunner, who will assume his role on March 1, 2025. The discussion also involved Heather Gentry from Investor Relations.
Despite a general slowdown in industrial real estate due to increased capital costs, reduced demand, and a surge in supply, LXP's portfolio of non-coastal warehouses with an average lease duration of approximately six years was highlighted as particularly resilient in the current market.
KeyBanc underscored LXP's efforts to lease about 3.4 million square feet of its speculative development projects and its strategy to leverage the portfolio's mark-to-market potential. The stock's dividend yield, which stands at a notable 5.1%, was also pointed out as an attractive feature for investors. According to KeyBanc, LXP shares have surpassed the Industrial REIT subsector's year-to-date performance by 690 basis points.
The firm's continued support of the $11.00 price target comes with an updated set of estimates that take into account the company's second-quarter earnings of 2024 and adjustments for the current interest rate environment, which includes changes to the forward Secured Overnight Financing Rate (SOFR) curve.
In other recent news, LXP Industrial Trust has reported strong financial results for the second quarter, including a 5% increase in same-store net operating income (NOI) and robust leasing activity. The company has raised its same-store NOI growth forecast to 4.5%-5.5% and completed its transformation into a pure-play industrial real estate investment trust (REIT) by selling its remaining office assets.
LXP leased 2.7 million square feet during the quarter, with rental increases of over 44%, and is actively reducing leverage while considering sales in non-core markets.
In terms of future developments, Nathan Brunner has been announced as the future CFO, starting in March 2025. The company has also invested $35 million in speculative and build-to-suit projects and has a fully available $600 million unsecured revolving credit facility. LXP is also exploring external growth opportunities, including more build-to-suit projects, and is close to finalizing deals with prospective tenants for facilities in Ocala and Aetna.
However, the company expects an increase in interest expense in 2025 due to expiring swaps on the term loan, which is anticipated to impact 2025 adjusted FFO by approximately $0.02 per diluted common share. Despite this, the company's portfolio transformation and strong leasing activity position it well in the industrial REIT market. These recent developments highlight LXP Industrial Trust's commitment to strategic asset management and financial prudence.
InvestingPro Insights
In light of KeyBanc Capital Markets' recent affirmation of an Overweight rating on LXP Industrial Trust, a glance at the latest InvestingPro data and tips can provide additional context for investors. LXP Industrial Trust boasts a sturdy track record of dividend reliability, having raised its dividend for 4 consecutive years and maintained payments for 31 years. This aligns with KeyBanc's highlight of the stock's substantial dividend yield, currently at 5.09%. Furthermore, the company's liquid assets surpass its short-term obligations, offering a layer of financial stability.
However, it's worth noting that LXP is trading at a high earnings multiple, with a P/E ratio of 114.94, and an even higher adjusted P/E ratio for the last twelve months as of Q2 2024 at 1260.21. This suggests that the stock may be priced optimistically relative to its earnings. Moreover, while the company has been profitable over the past year, analysts are cautious about its profitability in the current year, expecting net income to drop.
For investors seeking a more comprehensive understanding of LXP Industrial Trust's potential, there are 9 additional InvestingPro Tips available, which can be accessed on the InvestingPro platform. These insights could prove crucial in evaluating the company's performance and market position, especially when considering the mixed signals of strong dividend performance against a backdrop of high valuation multiples.
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