Investors in Lexington Realty (LXP) are encountering a more cautious outlook from Wall Street following a period of significant share price strength. Market strategists at KeyBanc Capital Markets have removed their bullish rating on the real estate investment trust, citing apprehensions over its valuation after a substantial rally.
Rating Shift to Neutral
In a move disclosed Thursday, KeyBanc adjusted its stance on Lexington Realty, lowering its rating from “Overweight” to “Sector Weight.” This revision reflects a direct response to the equity’s powerful performance. The industrial REIT’s stock has climbed approximately 24.5% since the start of the year, outpacing the broader sector by nearly eight percentage points.
Trading recently around $48.64, the shares are hovering close to their 52-week peak of $52.52. The downgrade suggests analysts now view the current trading level as largely fair, with limited scope for the stock to continue outperforming its industry peers in the near term.
Should investors sell immediately? Or is it worth buying Lexington Realty?
Financial Metrics and Strategic Execution
Separate from the analyst action, Lexington Realty continues to execute its corporate strategy. The firm recently completed the sale of two development properties for a combined $175 million. This transaction is strengthening its balance sheet, reducing the company’s leverage ratio by an estimated 0.5x.
- Recent Share Price: $48.64
- Year-to-Date Gain: ~24.5%
- Dividend Yield: Approximately 5.6% – 5.8%
- Consensus Price Target: $54.00 (average)
Dividend Track Record and Market Perspective
The company maintains its profile as a steady income investment. Lexington Realty has distributed a dividend for 32 consecutive years, with its current yield falling between 5.6% and 5.8%. While KeyBanc expresses reservation about further price appreciation, the consensus view among other covering analysts remains cautiously positive. The average rating stands at “Moderate Buy,” with individual price targets ranging from $50.00 to $57.50.
The shift to a “Sector Weight” classification signals an updated assessment of risk versus reward. Wall Street acknowledges the successful debt reduction and reliable dividend, but considers the valuation premium earned during 2025’s strong opening act to be mostly exhausted.
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