DA Davidson Upgrades Federal Realty Investment Trust, Likes Its Valuation

Investor sentiment toward the retail industry has improved, and one analyst says Federal Realty Investment Trust FRT’s valuation makes the stock a buy at current levels.

The Analyst

D.A. Davidson analyst James Lykins upgraded Federal Realty Investment from Hold to Buy and raised his price target from $125 to $145.

The Thesis

According to Lykins, all of the investors at the REITweek event were optimistic about the retail space, which bodes well for Federal Realty Investment.

“Despite the negative sentiment, this company has continued to perform from a fundamental perspective, and even with a negative overhang those fundamentals could catch up and drive the stock higher,” Lykins said.

Lykins also said Federal Realty Investment has extremely high-quality real estate and is adding several additional projects within the next year. In addition, leasing metrics have gotten more bullish.

“Last quarter, signed leases on a comparable store basis increased 22%, or 31% on a GAAP basis which includes the impact of straight-line rents,” Lykins said.

Management also said it expects lease rollover in 2018 to maintain the same level as the past couple of years.

Federal Realty Investment has consistently raised its dividend by a compound annual rate of 7 percent over the past 50 years and is one of only 26 S&P 500 companies with at least 50 consecutive years of payout hikes.

Lykins said Federal Realty Investment’s balance sheet is in excellent shape and it is one of only four REITs with at least an A- credit rating from Moody’s, S&P and Fitch.

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