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Liberty Property (LPT) Up 3.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Liberty Property (LPT - Free Report) . Shares have added about 3.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Liberty Property due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Liberty Property Q3 FFO & Revenues Surpass Estimates

Liberty Property Trust reported third-quarter 2018 FFO per share of 69 cents, which surpassed the Zacks Consensus Estimate of 65 cents. Total operating revenues of around $172.3 million for the quarter also outpaced the Zacks Consensus Estimate of $160.5 million.

On a year-over-year basis, the company’s FFO per share climbed from 66 cents per share recorded in the year-earlier quarter. However, total operating revenues marginally fell from the prior-year figure.

During the reported quarter, Liberty Property accomplished lease deals for 5.1 million square feet of space. As of Sep 30, 2018, occupancy at the company’s in-service portfolio, spanning 103.5 million square feet, shrunk 40 basis points (bps) sequentially to 96.6%.

Quarter in Detail

Liberty Property’s industrial portfolio, spanning 97.5 million square feet of area, had occupancy of 96.5% at the end of the third quarter, marking a contraction of 50 bps from the previous quarter. Industrial distribution rents escalated 17.5% on an U.S. GAAP basis on retention and replacement leases signed during the quarter.  

The office portfolio, comprising 6.0 million square feet of space, had occupancy of 96.9%, up 30 bps from the previous quarter. Office rents were up 45.8% on an U.S. GAAP basis on retention and replacement leases.

Same-store operating income for the industrial portfolio increased 4.1% on a cash and 3.8% on a GAAP basis from the prior-year quarter.

Portfolio Activity

During the Sep-end quarter, Liberty acquired two industrial buildings in New Jersey and one industrial building in Texas, aggregating 1.3 million square feet of space, for $101.1 million.

On the other hand, Liberty sold five office buildings in Arizona, totaling 806,000 square feet of area, for $255 million. The company also sold 66 acres of land in the Lehigh Valley for $9.7 million.

The company brought into service three industrial development properties, having 803,000 square feet of leasable space and 64.7% occupied as of the end of the quarter, for a total investment of $52.8 million. Further, Liberty commenced development of eight properties during the quarter under review, aggregating 1.8 million square feet of leasable space, at an estimated investment of $179 million.

Balance-Sheet Position

Liberty Property exited third-quarter 2018 with cash and cash equivalents of around $17.8 million, up from $11.9 million recorded at the end of December 2017.

Outlook

Liberty Property revised its outlook for 2018. The company now guides FFO per share of $2.07-$2.09 compared to its previous outlook of $2.01-$2.08. Excluding certain charges incurred in the second quarter, the new range is $2.64-$2.66.

The company also increased its projected disposition activity to $800-$950 million from $700-$900 million guided earlier. Further, the company projects rental increases on renewal and replacement leases in the industrial portfolio during 2018 in the range of 13-15% on a GAAP basis, and 5-6% on a cash basis.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Liberty Property has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Liberty Property has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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