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Should You Offload Cousins Properties (CUZ) Stock Now?

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Geographic concentration of assets is a major concern for Cousins Properties Incorporated (CUZ - Free Report) . Delayed re-leasing efforts and high supply in office real estate market are other headwinds. However, the company is likely to capitalize on high-quality portfolio, strategic developments and buyouts.

Since the assets of the company are mostly concentrated in Atlanta, Austin, Charlotte, Phoenix and Tampa, any economic or political downturn in these markets will be concerning for the company.

The company has a notable development pipeline, with an estimated project cost of $363 million as of the first-quarter 2021 end. While such activities are accretive for value creation, these require huge capital outlays. An extensive development pipeline increases the company’s operational risks by exposing it to construction cost overruns, entitlement delays and lease-up risks.

As the coronavirus pandemic has led to an uncertain economic environment, the REIT is likely to continue facing pressure from higher tenant lease concessions, including free rent and tenant improvement allowances for its leasing negotiations.

Also, the trend in estimate revisions for the company's 2021 FFO per share shows a bearish stance as estimates have been revised marginally downward in the past week.

Shares of Cousins Properties have gained 13.6% over the past six months, underperforming the industry’s rally of 22.9%. It currently carries a Zacks Rank #4 (Sell).

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Yet, the company enjoys a well-diversified, high-end tenant roster with less dependence on a single industry, which will likely support its top-line growth. Cousins Properties has been making concerted efforts to upgrade portfolio quality with trophy assets’ acquisitions and opportunistic developments in high-growth Sun Belt submarkets.

The Sun Belt region has been seeing an inbound migration of corporations and people. Significant investments announced by office-occupiers will help the company witness rebound in demand for its high-quality, well-placed office properties.

In fact, assets in these markets are commanding higher rents than the broader market. The company has been witnessing growth in in-place gross rent.

Stocks to Consider

Duke Realty Corporation’s Zacks Consensus Estimate for 2021 funds from operations (FFO) per share has moved up marginally to $1.68 in the past two month. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Digital Realty Trust, Inc.’s (DLR - Free Report) FFO per share estimates for the current year have remained unchanged in the past 60 days at $6.53. The company carries a Zacks Rank of 2, currently.

CoreSite Realty Corporation’s (COR - Free Report) Zacks Consensus Estimate for ongoing-year FFO per share has remained unchanged at $5.50 in two months’ time. The company has a Zacks Rank of 2 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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