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Why Is Liberty Property (LPT) Down 5.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Liberty Property (LPT - Free Report) . Shares have lost about 5.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Liberty Property due for a breakout? 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 Beats Q1 FFO Estimates, Raises Guidance

Liberty Property Trust reported first-quarter 2019 NAREIT FFO per share of 62 cents, which surpassed the Zacks Consensus Estimate of 60 cents.

Results reflect 4.6% increase in cash same-store operating income. Amid healthy demand from users for industrial space, the company witnessed a solid leasing activity. Moreover, it raised its 2019 FFO guidance.

However, revenues were down 8.7% from the prior-year period to $157.8 million. The revenue figure also missed the Zacks Consensus Estimate of $168.5 million.

Quarter in Detail

For its industrial portfolio, during the reported quarter, Liberty Property accomplished lease deals for 8.9 million square feet of space. As of Mar 31, 2019, occupancy at the company’s in-service operating portfolio, spanning 103.0 million square feet, shrunk 70 basis points (bps) sequentially to 95.6%. Rents increased 6.6% on a cash basis (16.3% GAAP) on retention and replacement leases commenced during the quarter.

Property level operating income for same-store properties were up 4.6% on a cash basis (1.7% GAAP) year over year.

Portfolio Activity

During the March-end quarter, Liberty Property acquired five industrial properties, aggregating 1.1 million square feet, for $127.5 million. At the same time, the company sold four operating properties, totaling 297,000 square feet, for $85.2 million.

The company brought into service six industrial properties, comprising 850,000 square feet of space for a total investment of $89.1 million. These properties are currently 100% leased and were 87.8% occupied as of the end of the first quarter.

Balance-Sheet Position

Liberty Property exited first-quarter 2019 with cash and cash equivalents of around $96.9 million, up from $84.9 million recorded at the end of December 2018.

Outlook

Liberty Property raised its guidance for 2019. The company guided its FFO per share of $2.55-$2.65 compared to the prior projection of $2.53-$2.65.

The company expects same-store property level operating income for industrial properties to be up 1.6-2.6% on a GAAP basis and 3-4% on a cash basis. This reflects the expectation of an 849,000-square-foot space vacate on May 1 by a major retailer in bankruptcy.

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 F on the value side, putting it in the fifth quintile 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 this revision 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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