Cousins Property Rating Lowered To Neutral By Baird Due To Houston Headwinds

Baird’s David Rodgers downgraded Cousins Properties  CUZ from Buy to Neutral while reiterating the company's $11.00 price target.

The analyst’s rating cut reflected a forecasted negative trend in Class A Houston rent prices. At the same time, concessions were rising and availability was growing, posing a threat to Cousin shares.

“Improved leasing for CUZ during 2Q16 was encouraging but the current headwinds in Houston present a sizable challenge to improved valuation in our view,” stated Rodgers.

The analyst appreciated Cousins Property’s strong earnings report in late July.

“After several quarters of declining leasing relative to total availability, CUZ was able to reverse that trend during 2Q16 with leasing that once again approached the eight-quarter trend,” stated Rodgers.

Rodgers, however, was dissatisfied with the company’s announcement regarding their plan to avoid Florida markets given the “difficulty in gaining scale and finding the right opportunities” Rodgers believed Florida could have been used as a “source of proceeds to deleverage the post-merger Cousins” once its transactions closed.

Overall, Rodgers expected potential downside to continue until Cousins Properties finishes its Houston property spinoff.