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Federal Realty Investment Trust FRT

Morningstar Rating
$102.12 +0.58 (0.57%)
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Company Report

Following Two Years of Rising Interest Rates, We Believe REITs Are Trading at Significant Discounts

We believe that there are several attractive opportunities across the US REIT sector for investors to consider. Following the recovery of many REIT sector fundamentals from the pandemic by mid-2021, we viewed the REIT sector as fairly valued through early 2022. However, the past two years have seen the rapid rise in interest rates and a slowing economy, which has led to major valuation declines across the sector. Our analysis of the REIT sector over the past 25 years suggests that the relative stock performance of REITs is negatively correlated with interest rate movements. The second and third quarters of 2023 saw large interest rate increases with the 10-year Treasury approaching 5%, which led to the sector underperforming. This occurred even as many REITs reported same-store net operating income, or NOI, growth at historical highs in 2022 due to high inflation. Higher interest rates, lower liquidity, tighter capital market conditions, and decelerating same-store NOI growth all led to a significant correction in the stock price for many REITs.

Price vs Fair Value

FRT is trading at a 30% discount.
Price
$99.03
Fair Value
$236.00
Uncertainty
Medium
1-Star Price
$361.90
5-Star Price
$24.50
Economic Moat
Hcnb
Capital Allocation
Ymqszjyyg

Bulls Say, Bears Say

Bulls

Federal Realty reports peer-leading population density and annual household income in proximity to its centers, providing a strong demographic base for its tenants.

Bears

Federal’s development pipeline is focused on a few large mixed-use projects, which exposes the company to risk from any of these particular projects failing and also increases exposure to real estate segments beyond its traditional retail focus.

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News

Trading Information

Previous Close Price
$101.54
Day Range
$101.67103.19
52-Week Range
$85.27107.61
Bid/Ask
$101.50 / $102.79
Market Cap
$8.47 Bil
Volume/Avg
674,206 / 655,441

Key Statistics

Price/Earnings (Normalized)
38.74
Price/Sales
7.33
Dividend Yield (Trailing)
4.26%
Dividend Yield (Forward)
4.27%
Total Yield
4.26%

Company Profile

Federal Realty Investment Trust is a shopping center-focused retail real estate investment trust that owns high-quality properties in eight of the largest metropolitan markets. Its portfolio includes an interest in 102 properties, which includes 26.0 million square feet of retail space and over 3,100 multifamily units. Federal's retail portfolio includes grocery-anchored centers, superregional centers, power centers, and mixed-use urban centers. Federal Realty has focused on owning assets in highly desirable areas with significant growth, and as a result, the average population density and average median household income are higher for its portfolio than for any other retail REIT.
Sector
Real Estate
Industry
REIT - Retail
Stock Style Box
Small Core
Total Number of Employees
322

Competitors

Valuation

Metric
FRT
O
KIM
Price/Earnings (Normalized)
38.7439.3132.25
Price/Book Value
3.011.241.28
Price/Sales
7.339.196.80
Price/Cash Flow
15.0213.4611.36
Price/Earnings
FRT
O
KIM

Financial Strength

Metric
FRT
O
KIM
Quick Ratio
1.551.496.40
Current Ratio
1.551.536.42
Interest Coverage
2.452.103.57
Quick Ratio
FRT
O
KIM

Profitability

Metric
FRT
O
KIM
Return on Assets (Normalized)
3.11%2.07%3.92%
Return on Equity (Normalized)
9.35%3.61%7.37%
Return on Invested Capital (Normalized)
4.99%3.47%4.41%
Return on Assets
FRT
O
KIM
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