Lineage falls on weak 2026 guidance, revenue miss
Cold storage REIT expects AFFO decline as industry faces capacity glut and demand softness
Lineage, Inc. shares declined in pre-market trading on Wednesday after the cold storage real estate investment trust issued disappointing 2026 guidance and reported quarterly revenue that fell short of Wall Street expectations, signaling continued challenges in an industry grappling with capacity oversupply.
The company reported fourth-quarter adjusted funds from operations of 83 cents per share, according to investing.com, meeting analyst projections. However, revenue of $1.34 billion missed estimates by approximately 3.1%, with analysts anticipating between $1.37 billion and $1.41 billion for the quarter. Adjusted EBITDA declined 2.4% year-over-year to $327 million, while margins compressed by 50 basis points to 24.5%.
More concerning for investors was the company's 2026 outlook. Lineage guided for AFFO per share between $2.75 and $3.00, with a midpoint of $2.88, representing a decline of 11% to 18% from full-year 2025 AFFO of $3.37 per share. The weaker-than-expected guidance marked a key factor in the negative market reaction, as analysts had previously anticipated stronger performance.
The outlook reflects broader challenges in the cold storage sector, where an imbalance between supply and demand has pressured pricing and occupancy. Baird analysts, who downgraded Lineage from Outperform to Neutral in December 2025 and lowered their price target from $45 to $39, have described 2026 and 2027 as "muddle-through years" due to the time required for excess capacity to normalize in the system.
"The upside potential for Lineage shares appears limited until same-store revenues demonstrate a positive inflection," Baird analyst Nicholas Thillman wrote in the December downgrade note. The firm cited concerns about supply-demand imbalances within the cold storage sector, though acknowledged that Lineage remains better positioned than competitors regarding customers reducing volume guarantee commitments.
Morgan Stanley also adjusted its outlook, cutting its price target to $39 from $46 following the earnings release, according to analyst tracking data. The consensus rating among analysts now stands at Hold, with 12 of 19 analysts recommending investors hold the stock amid uncertainty about the company's near-term trajectory.
For the full fiscal year 2025, Lineage reported revenue of $5.36 billion and a GAAP net loss of $113 million, or 43 cents per diluted share. Adjusted EBITDA for the year decreased 2.3% to $1.30 billion, while AFFO increased 22.7% to $865 million. The company declared a dividend of 52.75 cents per share for the fourth quarter of 2025, maintaining its annual payout of $2.11 per share and yielding approximately 5.5% at current levels.
Investor sentiment has turned cautious on the cold storage REIT sector more broadly, as concerns mount about the sustainability of dividends given compressed operating margins and limited growth visibility. Lineage's elevated payout ratio relative to projected 2026 AFFO has raised questions about dividend sustainability, according to market analysis.
The company, which completed its initial public offering in July 2025, has faced headwinds from tariff-related challenges and softer demand in certain end markets. Management has emphasized its focus on optimizing operations and improving same-store performance, though analysts expect the recovery to be gradual given the current oversupply conditions in the cold storage market.
Shares of Lineage, which have traded between $31.97 and $59.28 over the past 52 weeks, were under pressure in early trading following the announcement. The stock's decline reflects growing investor skepticism about the company's ability to navigate industry headwinds and deliver growth in the near term.