Cousins Properties Incorporated CUZ is a promising stock right now backed by its organic and inorganic growth strategies that poises it well for future growth. Further, earnings growth prospects and industry tailwinds make it an attractive pick.
This March, it sold air rights at The Gulch, retaining office development rights on the property. The company will also develop Norfolk Southern’s new headquarters at 650 West Peachtree in Midtown Atlanta. In addition, the company strengthened its portfolio in Midtown Atlanta with the acquisition of 1200 Peachtree, a Class A office building. These transactions offer value-accretion opportunities over the long term, encouraging Cousins Properties to raise its 2019 earnings outlook.
Cousins Properties not only beat estimates in the last reported quarter, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its prospects. Over the past 30 days, the Zacks Consensus Estimate for 2019 funds from operations (FFO) per share moved 12.7% north.
Further, this Zacks Rank #2 (Buy) stock has gained around 23.1% over the past three months, outperforming 12% growth recorded by the industry.
Notably, Cousins Properties has a number of other aspects that make it an attractive investment option.
Why Cousins Properties is an Attractive Pick
Revenue Strength: Cousins Properties continues to make steady progress toward improving its top line. Revenues witnessed a 28% compounded annual growth rate (CAGR) over the five-year period ended 2018. Also, the company’s projected sales growth (F1/F0) of 7.06% (the industry average being 3.13%) indicates constant upward momentum in revenues.
Strong Leverage: Cousins Properties’ debt/equity ratio stands at 0.38 compared with the industry average of 0.84, indicating a relatively lower debt burden. This reflects that it has a lower debt burden relative to its peers and will likely be able to perform well even in a dynamic business environment. In addition, the company is focused on improving its balance-sheet position which will enable it to leverage on improving market fundamentals and raise operational efficiency.
Operational Strength:Cousins Properties owns an unmatched portfolio of Class A office assets concentrated over the high-growth Sun Belt markets. Also, assets in these markets command higher rents compared with the broader market. Additionally, with trophy assets’ acquisitions and opportunistic developments, the company has built a stronger portfolio that drove its performance. In fact, the company recorded positive year-over-year cash net operating income (NOI) growth during fourth-quarter 2018, which marks the 28th consecutive quarter of such increase.
Encouraging FFO picture:Over the trailing four quarters, the company’s FFO per share has surpassed the Zacks Consensus Estimate, with average beat of 3.23%. This encouraging performance will likely continue as reflected by its long-term (three-five years) projected FFO per share growth rate of 15.1% (higher than the industry average of 1.71%). Moreover, strategic transactions executed in Atlanta encouraged the company to increase its 2019 FFO per share guidance to 70-75 cents, up from the 61-65 cents, provided earlier.
Other Stocks to Consider
Investors can also consider other top-ranked stocks from the same space like Terreno Realty Corporation TRNO, Alexandria Real Estate Equities, Inc. ARE and Boston Properties, Inc. BXP. All three stocks carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Terreno Realty’s FFO per share estimates for first-quarter 2019 remained unchanged at $1.32, over the last month. Further, it has a long-term growth rate of 8.40%.
Alexandria’s Zacks Consensus Estimate for 2019 FFO per share has been revised upward marginally to $6.96 over the last month. Also, it has a long-term growth rate of 4.4%.
Boston Properties’ FFO per share estimate for the ongoing year has been revised marginally north to $6.92 in seven days’ time. Additionally, it has a long-term growth rate of 6.20%.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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