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Is a Hold Strategy Apt for Cousins Properties (CUZ) Now?
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Cousins Properties Incorporated (CUZ - Free Report) enjoys robust rent and top-line growth, with a portfolio of office realties located in premium Sun-Belt markets. However, a significant development pipeline increases operational risks and exposes the company to rising construction costs.
Amid robust job growth in the Sun Belt region, the area is witnessing strong influx of population. This favorable migration trend and pro-business environment are spurring demand for office spaces. Hence, assets in these markets are expected to command higher rents compared with the broader market.
Steady revenues over different economic cycles also remain a positive for the company. In fact, its revenues have witnessed a CAGR of 28% over the five-year period ended 2018, while cash net operating income (NOI) have improved for 29 consecutive quarters.
Further, the company has been focused on growth, aided by development and value creation. Importantly, strategic acquisitions and opportunistic developments in high-barrier-to-entry submarkets have enabled the company to build a stronger platform of trophy assets. Additionally, timely non-core dispositions help Cousins Properties prune its portfolio.
Moreover, adequate liquidity, strong balance sheet, sufficient balances in its secured revolving credit facility and a well-laddered debt profile also aids the company to pursue its growth plans.
Cousins Properties’ development pipeline is pivotal for its growth. Nevertheless, an extensive development pipeline, with an estimated project cost of $199.9 million (at the company’s share), escalates operational risks by exposing it to construction cost overruns, entitlement delays and lease-up risks.
In fact, pressure on construction cost over the last five years is anticipated to dent development returns. Additionally, focus to increase its land bank requires huge capital outlays.
Also, an increase in construction activity is resulting in new supply. Although demand for office space should keep pace with the new supply, it is likely to result in moderation in rent growth and occupancy.
Further, geographic concentration of assets makes the company’s performance vulnerable to any unfavorable economic or political development in the region.
This apart, shares of this Zacks Rank #3 (Hold) company have gained 16.2% over the past six months compared with the industry’s growth of 20.9%. Nonetheless, the trend in estimate revisions of 2019 funds from operations (FFO) per share indicates an upbeat outlook for the company as it has witnessed upward revisions over the past month.
Host Hotels & Resorts’ FFO per share estimates for 2019 moved marginally north to $1.82 in two months’ time.
Duke Realty’s FFO per share estimates for the ongoing year have been revised slightly upward to $1.42, in the past 30 days.
Lamar Advertising’s FFO per share estimates for the current year have been revised slightly upward to $5.83, over the past 30 days.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Is a Hold Strategy Apt for Cousins Properties (CUZ) Now?
Cousins Properties Incorporated (CUZ - Free Report) enjoys robust rent and top-line growth, with a portfolio of office realties located in premium Sun-Belt markets. However, a significant development pipeline increases operational risks and exposes the company to rising construction costs.
Amid robust job growth in the Sun Belt region, the area is witnessing strong influx of population. This favorable migration trend and pro-business environment are spurring demand for office spaces. Hence, assets in these markets are expected to command higher rents compared with the broader market.
Steady revenues over different economic cycles also remain a positive for the company. In fact, its revenues have witnessed a CAGR of 28% over the five-year period ended 2018, while cash net operating income (NOI) have improved for 29 consecutive quarters.
Further, the company has been focused on growth, aided by development and value creation. Importantly, strategic acquisitions and opportunistic developments in high-barrier-to-entry submarkets have enabled the company to build a stronger platform of trophy assets. Additionally, timely non-core dispositions help Cousins Properties prune its portfolio.
Moreover, adequate liquidity, strong balance sheet, sufficient balances in its secured revolving credit facility and a well-laddered debt profile also aids the company to pursue its growth plans.
Cousins Properties’ development pipeline is pivotal for its growth. Nevertheless, an extensive development pipeline, with an estimated project cost of $199.9 million (at the company’s share), escalates operational risks by exposing it to construction cost overruns, entitlement delays and lease-up risks.
In fact, pressure on construction cost over the last five years is anticipated to dent development returns. Additionally, focus to increase its land bank requires huge capital outlays.
Also, an increase in construction activity is resulting in new supply. Although demand for office space should keep pace with the new supply, it is likely to result in moderation in rent growth and occupancy.
Further, geographic concentration of assets makes the company’s performance vulnerable to any unfavorable economic or political development in the region.
This apart, shares of this Zacks Rank #3 (Hold) company have gained 16.2% over the past six months compared with the industry’s growth of 20.9%. Nonetheless, the trend in estimate revisions of 2019 funds from operations (FFO) per share indicates an upbeat outlook for the company as it has witnessed upward revisions over the past month.
Key Picks
Investors can consider better-ranked stocks from the same space like Host Hotels & Resorts, Inc. (HST - Free Report) , Duke Realty Corporation and Lamar Advertising Co. (LAMR - Free Report) , each carrying a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Host Hotels & Resorts’ FFO per share estimates for 2019 moved marginally north to $1.82 in two months’ time.
Duke Realty’s FFO per share estimates for the ongoing year have been revised slightly upward to $1.42, in the past 30 days.
Lamar Advertising’s FFO per share estimates for the current year have been revised slightly upward to $5.83, over the past 30 days.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>