Here's Why You Should Retain Cousins Properties (CUZ) Stock
Cousins Properties’ CUZ unmatched portfolio of class A office assets, concentrated in the high-growth markets in the Sun Belt region, positions it well to ride the growth curve. Its capital-recycling efforts and a robust balance sheet augur well. However, a choppy office real estate market amid persistent macroeconomic uncertainty and high interest rates makes us apprehensive.
Cousins Properties is witnessing healthy leasing demand for its highly-amenitized and well-placed office properties. In the six months ended Jun 30, 2023, it executed 69 leases for a total of 693,330 square feet of office space with a weighted average term of 6.9 years. This included 501,806 square feet of new and expansion leases, denoting 72.4% of the total leasing activity.
Given the favorable migration trends and a pro-business environment in the Sun Belt markets, corporate relocations and expansions are likely to continue in the region, boosting demand for CUZ’s properties in the quarters ahead.
The company enjoys a well-diversified, high-end tenant roster with less dependence on a single industry. This enables it to generate stable rental revenues over time. For 2023, we estimate a year-over-year increase of 7% in rental property revenues.
Moreover, Cousins Properties capital-recycling moves to enhance its portfolio quality with trophy asset acquisitions and opportunistic developments in high-growth Sun Belt submarkets seem encouraging for growth while preserving financial flexibility.
Notably, in the last two years, the company sold more than a billion worth of slow-growth assets and redeployed the proceeds for developing and acquiring highly differentiated amenitized properties in Austin, Nashville, Atlanta, Tampa and Charlotte.
CUZ maintains a healthy balance sheet position and exited the second quarter of 2023 with cash and cash equivalents of $8 million. As of Jun 30, 2023, it had a borrowing capacity of $851.5 million under its $1 billion credit facility. With limited near-term debt maturities and ample financial flexibility, the company is well-positioned to capitalize on future growth opportunities.
Analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2023 funds from operations per share has been raised marginally over the past month to $2.61.
Shares of the company have gained 4.1% in the quarter-to-date period against the industry’s fall of 1.5%.
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Nonetheless, a choppy office market environment amid persistent macroeconomic uncertainty is likely to soften the demand for office properties in the near term, raising concerns for this office REIT.
Competition from industry peers may limit the company’s ability to retain tenants at relatively higher rents, denting its pricing power. Also, the elevated supply of office properties amid a competitive landscape may adversely impact Cousins Properties’ ability to backfill near-term tenant move-outs, hurting rent growth and occupancy.
Further, given the prevailing high interest rate environment, Cousins Properties may find it challenging to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side. We anticipate a year-over-year rise of 38.1% in interest expenses in the current year.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Welltower WELL, SBA Communications SBAC and Americold Realty Trust COLD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Welltower’s 2023 FFO per share has been raised marginally over the past month to $3.53.
The Zacks Consensus Estimate for SBA Communications’ current-year FFO per share has moved marginally northward over the past week to $12.88.
The Zacks Consensus Estimate for Americold Realty Trust’s ongoing year’s FFO per share has been raised 1.6% over the past week to $1.26.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Cousins Properties Incorporated (CUZ) : Free Stock Analysis Report
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