Shares of Lexington Realty Trust (LXP - Snapshot Report) have been on an uptrend since year-end 2011, aided by strengthening market fundamentals and a diversified property portfolio that mitigates operating risks. With an impressive year-to-date return of 33.3%, the stock is currently trading close to its 52-week high of $10.03. This diversified REIT (real estate investment trust) currently retains a Zacks #1 Rank (Strong Buy).
On August 7, Lexington Realty reported second quarter total gross revenues of $83.9 million, which was up 6.9% year over year. The top-line growth was due primarily to acquisitions and a healthy rise in occupancy levels. Overall portfolio occupancy at quarter-end was fairly high at 97.6%.
Second quarter 2012 FFO (funds from operations) of 23 cents per share were in line with the Zacks Consensus Estimate and compared favorably with the previous years 22 cents. Lexington Realty paid a quarterly dividend of 12.5 cents, which marked an 8.7% increase over the year-ago payout.
Based on strong second quarter results, management raised both the lower- and upper-end of the adjusted FFO guidance for 2012 by 1 cent each. Currently, the FFO is expected between 93 cents and 96 cents per share, compared with the earlier range of 92 cents 95 cents. The guidance, however, excludes any material impact from future acquisitions, asset sales, secondary offerings or repurchases, debt financings or repayments.
Surge in Earnings Estimates
Over the past 30 days, the Zacks Consensus Estimate for 2012 increased 2.1% to 96 cents as four estimates out of five were revised upward. For 2013, the Zacks Consensus Estimate has increased 6.3% to $1.02 over the same period (representing year-over-year growth of 6.4%), as four of six estimates have risen.
Lexington Realtys valuation looks fairly attractive on a price-to-earnings (P/E) and price-to-sales (P/S) basis. Shares are trading at a forward P/E of 10.30x, a 35.2% discount to the peer group average of 15.89x. On a P/S basis, the stock is currently trading at 4.62x versus the peer group average of 4.96x.
Chart Resonates Growth Potential
Since January 19, 2012, Lexington Realty shares have fared better than the simple moving average for 200 days or SMA (200), barring a few occasional pull backs. The uptrend in stock prices, as mirrored in the following chart, offers an enticing upside potential going forward. Volume is fairly strong, averaging 636K daily. The year-to-date return for the stock is also noteworthy at 33.3% compared with an S&P 500 tally of 12.6%.
Based in New York City, Lexington Realty primarily owns and manages commercial properties throughout the U.S. The portfolio is well-diversified by property type, geographic location, lease term, and tenant industry concentration. The portfolio diversification insulates the company against regional recession, industry-specific downturns, and fluctuation in property values and market rent levels. This in turn mitigates operating risks and provides a steady revenue stream. Furthermore, the company usually offers its properties under a net lease agreement, under which virtually all property operating expenses such as insurance, real estate taxes, utilities, maintenance and repairs are generally paid by its tenants. The company currently has a market cap of $1.5 billion.