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On Aug 7, 2013, Zacks Investment Research upgraded Highwoods Properties Inc. (HIW - Analyst Report) – a real estate investment trust (REIT) – to a Zacks Rank #2 (Buy). The upgrade came on the back of Highwoods’ better-than-expected second-quarter 2013 results, driven by the successful implementation of its strategic plan.

Why the Upgrade?

Highwoods has been witnessing rising funds from operations (FFO) estimates thanks to decent second-quarter 2013 results and an enhanced guidance for full-year 2013. The company reported second-quarter 2013 core FFO of 70 cents per share, beating the Zacks Consensus Estimate by a penny. Decent results came on the back of strong leasing, efficient capital deployment activity as well as cash NOI growth.

Impressed by the results, Highwoods revised its FFO per share guidance for full-year 2013 in the range of $2.76–$2.84, up from $2.68–$2.81 forecasted earlier. The optimism reflected the company’s solid operating performance in the quarter and opportune joint venture interest acquisition.

Moreover, Highwoods has a strong balance sheet and its efforts to enhance the liquidity position and portfolio quality have been recognized by rating agencies in recent times. The company received a senior debt rating upgradation from Standard & Poor's Ratings Services (raised to BBB, from BBB-, with a stable outlook in July) and Moody's Investors Service, the rating arm of Moody's Corporation (MCO - Analyst Report) (Baa2, from Baa3, with a stable outlook in June).

As a result of these bullish factors, the tendency for an upward estimate revision has been obvious in recent times. Over the last 30 days, the Zacks Consensus Estimate for 2013 FFO per share rose by 1.8% to $2.80. The current estimate is within the guidance range provided by Highwoods. For 2014, the Zacks Consensus Estimate for FFO per share rose by 1.4% to $2.88.

Other Stocks to Consider               

Other well performing REITs include CubeSmart (CUBE - Snapshot Report) and Douglas Emmett Inc (DEI - Snapshot Report). Both these stocks carry a Zacks Rank #2 (Buy).

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.

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