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Will Highwoods (HIW) Grow on Strong Operating Results?

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We updated our research report on Highwoods Properties Inc. (HIW - Free Report) on Jun 21, 2016. This Raleigh, NC-based real estate investment trust (“REIT”) is engaged in owning, managing, leasing and developing office, industrial and retail properties.

Robust operating performance continues to enhance Highwoods’ prospects. Same property cash net operating income (“NOI”) rose 3.7% year over year in first-quarter 2016, led by a rise in same property revenues. Further, management anticipates same property cash NOI guidance from continuing operations for 2016 to range within 4–5%.

Further, Highwoods is aiming at expanding its footprint in high-growth markets, through premium asset acquisitions and developments. The company is currently focused on the development and acquisition of best business district office properties. Also, it is disposing its non-core assets and investing the proceeds for further expansion.

Earlier, Highwoods reported first-quarter 2016 funds from operations (“FFO”) of 82 cents per share, which beat the Zacks Consensus Estimate by 3 cents. Further, the bottom line improved by a penny year over year. Results reflected a strong growth in same-property NOI.

However, Highwoods has a large development pipeline which raises operational risks by exposing it to higher construction costs, entitlement delays and lease-up risks. Also, the company generates a significant amount of revenues from its office portfolio, which has a limited scope for robust near-term growth.

In the past seven days, the Zacks Consensus Estimate for 2016 and 2017 remained unchanged at $3.25 and $3.47, respectively. The stock presently carries a Zacks Rank #3 (Hold).
 

HIGHWOODS PPTYS Price and Consensus

HIGHWOODS PPTYS Price and Consensus | HIGHWOODS PPTYS Quote

However, investors interested in the REIT sector can consider stocks like Apple Hospitality REIT, Inc. (APLE - Free Report) , Brookfield Canada Office Properties and CoreSite Realty Corporation (COR - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong 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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