Balanced View on Cousins Properties - Analyst Blog

On Apr 16, 2014, we issued an updated research report on real estate investment trust (REIT) – Cousins Properties Inc. CUZ.

On Feb 13, aided by a two-fold rise in quarterly revenues, Cousins Properties reported a positive earnings surprise of 12.5% in fourth-quarter 2013. In particular, the company reported FFO per share of 18 cents in the quarter, beating the Zacks Consensus Estimate by 2 cents and the year-ago figure by 4 cents.

Cousins Properties' diversified portfolio is primarily concentrated in the high-growth Sun Belt markets, which exhibit above-average job growth. Moreover, the company focuses on increasing the value of its current portfolio by inking long-term lease deals with high-end tenants which helps it experience elevated levels of occupancy at its properties.

Additionally, the company's focus on simplifying its business by specifically targeting trophy assets and opportunistic investments is commendable. In addition, the company's first-quarter dividend hike to boost stockholders' return is encouraging.

However, stiff competition and sluggish recovery in office market fundamentals may lower Cousins Properties' growth in profitability. Also, increasing Internet sales that adversely impact the demand for the company's retail space could limit its growth prospects. Moreover, interest rates are anticipated to rise in the long term and this may weigh on Cousins Properties' ability to refinance existing debt.

Over the last 60 days, the Zacks Consensus Estimate for FFO per share for both 2014 and 2015 moved up by 3 cents and 4 cents to 71 cents and 77 cents per share, respectively. The stock currently has a Zacks Rank #2 (Buy).

Stocks That Warrant a Look

Investors interested in the REIT industry may also consider stocks like Duke Realty Corp. DRE, SL Green Realty Corp. SLG and Alexandria Real Estate Equities, Inc. ARE. All three stocks have the same rank as Cousins Properties.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.