Why is it Wise to Hold On to Cousins Properties' (CUZ) for Now
Cousins Properties Incorporated’s CUZ trophy-asset acquisitions and opportunistic developments will enhance the company’s premier Sun Belt portfolio. However, such efforts involve significant capital outlays, while development projects escalate operational risks.
The high-growth Sun Belt region has been witnessing an influx of population. With a resilient economy and an encouraging job-market environment, the office market fundamentals of this region will likely remain robust. Further, favorable migration trends and a pro-business environment are spurring demand for office space in this region. Hence, realties in these markets are expected to command higher rents relative to the broader market.
Amid these favorable tailwinds, Cousins Properties is well positioned with an unmatched portfolio of Class A office assets. This offers ample scope for rent growth in the upcoming period.
The company is also unlocking compelling growth opportunities in the region by taking up development projects in high-barrier-to-entry submarkets in Atlanta, Austin, Charlotte, Phoenix and Tampa.
Further, it aims at non-core dispositions in non-core markets to fund its investment opportunities and improve portfolio quality. In line with these efforts, the company has executed dispositions for a gross sale price of around $1.78 billion since 2014.
Cousins Properties also maintains a solid balance sheet, with ample liquidity. This enables the company to leverage on the improving market fundamentals and raise operational efficiency, driving long-term growth.
The company has significant land bank to support its development initiatives. Although such activities are accretive for value creation, it requires huge capital outlays. Moreover, an extensive development pipeline escalates its operational risks by exposing it to construction cost overruns, entitlement delays and lease-up risks.
In addition, higher construction activity is expected to increase new supply of Class A office space in the company’s market. In fact, a report by CBRE Group CBRE indicates that the 2020 office completions of 51.1 million square feet will exceed the projected net absorption of 20 million square feet.This is intensifying competition for the company, leading to lesser scope for rent and occupancy growth.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 11.3%, as against the industry’s decline of 1.5%.
Stocks to Consider
EastGroup Properties, Inc. EGP currently carries a Zacks Rank of 2 (Buy). The company’s funds from operations (FFO) per share estimates for 2019 have been revised marginally upward to $4.96 in two months’ time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Duke Realty's DRE Zacks Consensus Estimate for 2019 FFO per share moved marginally north to $1.44 in the past two months. It carries a Zacks Rank of 2, at present.
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Duke Realty Corporation (DRE) : Free Stock Analysis Report
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