Can LPT Push to New Highs?
As commercial property markets continue to gain traction, it is important to monitor the publicly traded stocks seen in the space. One of the largest by market value is Liberty Property Trust (NYSE:LPT), which is a real estate investment trust (REIT) that invests in commercial real estate with added exposure in buildings, warehouses, and other commercial spaces.
In 2015, LPT had clocked revenues of $808.77 million for the year along with profits of $244.45 million. The stock is trading near $39, which has been the case for most of the month as markets on the whole have been less volatile and relatively sluggish. This is not indicative of the broader trend, however, as the stock has been showing strength over the last six months. The 52-week range in LPT is currently seen between $26.94 on the lower end and $42.25 at the highs.
Chart Outlook: Liberty Property Trust (LPT)
After the initial rate hike by the Federal Reserve in December 2015, the stock moved downward and hit long-term lows in the month of February 2016. Since then, the stock has been trending higher on the back of heightened economic activity in US markets and more robust spending in commercial real estate markets. LPT has generated a 21 percent return annually, and the stock has moved 26 percent higher on a YTD basis.
Earnings Outlook
For the second quarter, the company reported a rough period with a 14 percent fall relative to the first quarter. These numbers are somewhat misleading, however, as Liberty’s revenue performance fell by only 2 percent for the same period. This divergence led to some knee-jerk reactions in the stock but it should be noted here that revenues have been flat-lining for the company since the middle of 2014. So the real question for investors here is whether or not these trends have bottomed out and are ready for new rallies.
Chart View: LPT Quarterly Revenues
When making these determinations, investors will need to consider macro factors that will define the broader strength of the economy. The dropping unemployment rate, and increased economic activity in several industry sectors does bode well for the Real Estate Investment Trusts (REITs) as a whole. Demographic shifts to urban centers will continue to fuel the various forms of housing demand and for industrial facilities, office space and other commercial properties.
Cultural demographics will continue to have an impact, as well. Baby Boomers continue to retire at the rate of 10,000 per day, and this is something that has consistently added to housing sales over the last five years. Stability in the job market will also aid Millennials in finding jobs and eventually in buying their first properties. The US real market is the most stable and transparent commercial market, and this gives assets in these categories a safe-haven quality that is not seen in many areas of the financial markets. Uncertainty on the geopolitical front will likely draw foreign investors to these markets and stoke commercial real estate demand in the United States. So while Liberty Mutual Trust might not be the shining star of the space, it is more than likely that we will see gains in the stock as we head into next year.