Should You Retain Cousins Properties (CUZ) Stock for Now?
Cousins Properties CUZ is well-poised to benefit from its unmatched portfolio of class A office assets, concentrated in the high-growth markets in the Sun Belt region amid the recovering Unites States office real-estate market.
With the gradual return of the workforce to offices, Cousins Properties has been witnessing a recovery in demand for its highly-amenitized and well-placed office properties, as reflected by the rebound in new leasing volume.
In the third quarter of 2022, Cousins Properties executed 48 leases for a total of 431,378 square feet of office space with a weighted average term of 8.3 years. This included 209,258 square feet of new and expansion leases, denoting 48.5% of the total leasing activity.
More so, the next cycle of office-space demand will likely be driven by an inbound business migration and significant investments being made by office occupiers to expand their footprint in the Sun Belt regions. This is expected to boost the demand for CUZ’s high-quality portfolio of office assets in the forthcoming quarters.
The company’s well-diversified, high-end tenant roster assures stable rental revenues for the company and lowers the risk associated with dependency on single-industry tenants.
Cousins Properties has been making concerted efforts to enhance its portfolio quality with trophy asset acquisitions and opportunistic developments in high-growth Sun Belt submarkets.
In the last two years, the company has sold more than a billion worth of slow-growth assets and redeployed the proceeds for developing and acquiring highly differentiated amenitized properties in Austin, Nashville, Atlanta, Tampa and Charlotte. Also, its notable development pipeline seems encouraging.
On the balance sheet front, Cousins Properties exited the third quarter of 2022 with cash and cash equivalents of $5.5 million and a net debt-to-annualized EBITDAre ratio of 4.75, which improved from 4.93 sequentially.
With ample financial flexibility, the company is well-positioned to capitalize on future growth opportunities.
Shares of this Zacks Rank #3 (Hold) company have gained 6.7% over the past three months outperforming the industry’s growth of 0.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Nonetheless, the elevated supply of office properties weighs on Cousins Properties. Intense competition from developers, owners and operators of office properties and other commercial real estate limits its ability to retain tenants at relatively higher rents and dents its pricing power.
A majority of CUZ’s properties are concentrated in Atlanta, Austin, Charlotte, Phoenix and Tampa. Consequently, any economic downturn in these regions could negatively impact the company's top line.
Interest rate hikes are likely to increase borrowing costs, affecting the company’s ability to purchase or develop real estate.
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties VICI, Equity Commonwealth EQC and Service Properties Trust SVC.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92. VICI carries a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Equity Commonwealth’s 2022 FFO per share stands at 33 cents. EQC sports a Zacks Rank #1 currently.
The Zacks Consensus Estimate for Service Properties Trust’s ongoing year’s FFO per share is pegged at $1.44. SVC currently carries a Zacks Rank of 2.
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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Cousins Properties Incorporated (CUZ) : Free Stock Analysis Report
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