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Why Is Cousins Properties (CUZ) Down 1.9% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Cousins Properties (CUZ). Shares have lost about 1.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cousins Properties due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Cousins Properties Q2 FFO & Revenues Lag Estimates

Cousins Properties reported second-quarter 2019 FFO per share (before TIER transaction costs) of 71 cents, missing the Zacks Consensus Estimate by a whisker. Nonetheless, the figure came  in higher than the prior-year quarter’s reported tally of 60 cents.

Second-quarter 2019 revenue figure recorded year-over-year growth. Further, the company witnessed increase in same-property cash NOI. Yet, higher interest expense as well as general and administrative expenses unfavorably impacted results.

Rental property revenues for the quarter came in at $134.9 million, which compared favorably with $114.3 million witnessed in the year-ago quarter. The reported figure, however, missed the Zacks Consensus Estimate of $138.6 million.

Quarter in Detail

Cousins Properties executed leases for 1,089,318 square feet of office space during the April-June quarter. Same-property NOI, on a cash basis, increased 5.5% from the year-ago quarter. Moreover, second-generation net rent per square foot (cash basis) increased 4.9%.

During the reported quarter, Cousins Properties closed the merger with TIER REIT in a 100% stock-for-stock deal and completed a one-for-four reverse stock split.

Further, it signed a 15-year lease for the proposed corporate headquarters of the combined BB&T Corporation and SunTrust Banks, Inc. at Hearst Tower in Uptown Charlotte. The lease is for 561,000 square feet of space.

Cousins Properties exited the second quarter with cash and cash equivalents of around $11.9 million compared with the $2.5 million recorded as of Dec 31, 2018.

2019 Outlook

Cousins Properties revised its guidance for the full-year 2019 FFO per share. The company expects FFO per share (excluding transaction costs) in the band of $2.81 to $2.93 compared with the previous guidance of $2.80 to $2.96.

The projections for same property net operating income growth on cash basis have been revised to 3.25-5.25%, up from 3-5%. However, on account of the TIER transaction, Cousins Properties now anticipates general and administrative expenses, net of capitalized salaries, in the range of $34-$36 million, up from the $33.5-$35.5 million estimated earlier.

Per management, the TIER transaction is expected to reduce 2019 FFO per share by roughly 6 cents. Nonetheless, in 2020 the delivery and rent commencement at TIER development properties will likely reduce the impact of merger on earnings. The merger is anticipated to reduce 2020 FFO per share by nearly 6-12 cents. Also, management aims to realize $18.5 million of annual G&A synergies relating to the merger.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Cousins Properties has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cousins Properties has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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