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Cousins Properties (CUZ) Up 11.1% YTD: Will It Rise Further?
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Shares of Cousins Properties (CUZ - Free Report) have rallied 11.1% year to date, outperforming the industry's growth of 1.6%.
Cousins Properties’ portfolio of class A office assets is concentrated in the high-growth markets in the Sun Belt region. The company is witnessing higher leasing activity amid tenants’ preference for premium office spaces with class-apart amenities. Its capital-recycling efforts and healthy balance sheet augur well.
Later in July 2024, CUZ reported second-quarter 2024 funds from operations (FFO) per share of 68 cents, which beat the Zacks Consensus Estimate of 66 cents. Results reflected decent leasing activity and better-than-anticipated revenues.
The company, currently carrying a Zacks Rank #2 (Buy), also raised its guidance for 2024. It now expects FFO per share in the range of $2.63-$2.68 from the $2.60-$2.67 range projected earlier. The Zacks Consensus Estimate for the same is presently pegged at $2.66, which is within expectations.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price and check whether this trend will last or not.
Cousins Properties has an unmatched portfolio of Class A office assets concentrated in the high-growth Sun Belt markets. This region is experiencing a population influx. Amid favorable migration trends and a pro-business environment, corporate relocations and expansions in the Sun Belt markets have gained pace, and this is driving the demand for office space.
As a result, CUZ is witnessing healthy leasing demand for its strategically located office properties, as reflected by the rebound in new leasing volume. For the six months ended June 2024, it executed 77 leases for a total of 794,240 square feet of office space with a weighted average lease term of 7.8 years. This included 404,011 square feet of new leases, 268,210 square feet of renewal leases and 122,019 square feet of expansion leases. The company’s lease expirations through 2026 are among the lowest in the office sector.
Properties in these markets are also expected to command higher rents compared with the broader market. Per Cousins Properties’ June 2024 Investor Presentation, the company witnessed a 39% increase in in-place gross rents from the first quarter of 2017 to the first quarter of 2024.
Cousins Properties enjoys a well-diversified, high-end tenant roster with less dependence on a single industry. This enables it to generate stable rental revenues over time.
CUZ makes concerted efforts to upgrade portfolio quality with trophy assets’ acquisitions and opportunistic developments in high-growth Sun Belt submarkets. It also makes strategic dispositions for a better portfolio mix. The company has recycled more than $1 billion of older assets during the pandemic, helping it shed the slow-growth assets from its portfolio and redeploy the proceeds for developing and acquiring highly differentiated amenitized properties in the Sun Belt submarkets.
Moreover, over the past five years, Cousins Properties has acquired 2.6 million square feet of operating properties, completed 2.2 million square feet of development and sold 5.5 million square feet of operating properties. Its notable development pipeline is likely to deliver meaningful additional annualized net operating income (NOI) in the upcoming years.
Cousins Properties maintains a healthy balance sheet position and exited the second quarter of 2024 with cash and cash equivalents of $5.95 million. As of the same date, it had $317.1 million drawn under its $1 billion credit facility. With considerable liquidity and access to capital markets, the company seems well-placed to bank on long-term growth opportunities.
However, competition from its peers and high supply in the office real estate market is expected to adversely impact its pricing power. High interest rates add to its concerns.
Moreover, Cousins Properties has significant concentration risk in its portfolio. During the second quarter of 2024, Atlanta and Austin contributed 36% and 32.8%, respectively, to the company’s NOI.
The Zacks Consensus Estimate for Lamar Advertising’s 2024 FFO per share has moved marginally northward in the past month to $8.08.
The Zacks Consensus Estimate for Crown Castle Inc.’s ongoing year’s FFO per share has increased marginally over the past month to $6.97.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Cousins Properties (CUZ) Up 11.1% YTD: Will It Rise Further?
Shares of Cousins Properties (CUZ - Free Report) have rallied 11.1% year to date, outperforming the industry's growth of 1.6%.
Cousins Properties’ portfolio of class A office assets is concentrated in the high-growth markets in the Sun Belt region. The company is witnessing higher leasing activity amid tenants’ preference for premium office spaces with class-apart amenities. Its capital-recycling efforts and healthy balance sheet augur well.
Later in July 2024, CUZ reported second-quarter 2024 funds from operations (FFO) per share of 68 cents, which beat the Zacks Consensus Estimate of 66 cents. Results reflected decent leasing activity and better-than-anticipated revenues.
The company, currently carrying a Zacks Rank #2 (Buy), also raised its guidance for 2024. It now expects FFO per share in the range of $2.63-$2.68 from the $2.60-$2.67 range projected earlier. The Zacks Consensus Estimate for the same is presently pegged at $2.66, which is within expectations.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price and check whether this trend will last or not.
Cousins Properties has an unmatched portfolio of Class A office assets concentrated in the high-growth Sun Belt markets. This region is experiencing a population influx. Amid favorable migration trends and a pro-business environment, corporate relocations and expansions in the Sun Belt markets have gained pace, and this is driving the demand for office space.
As a result, CUZ is witnessing healthy leasing demand for its strategically located office properties, as reflected by the rebound in new leasing volume. For the six months ended June 2024, it executed 77 leases for a total of 794,240 square feet of office space with a weighted average lease term of 7.8 years. This included 404,011 square feet of new leases, 268,210 square feet of renewal leases and 122,019 square feet of expansion leases. The company’s lease expirations through 2026 are among the lowest in the office sector.
Properties in these markets are also expected to command higher rents compared with the broader market. Per Cousins Properties’ June 2024 Investor Presentation, the company witnessed a 39% increase in in-place gross rents from the first quarter of 2017 to the first quarter of 2024.
Cousins Properties enjoys a well-diversified, high-end tenant roster with less dependence on a single industry. This enables it to generate stable rental revenues over time.
CUZ makes concerted efforts to upgrade portfolio quality with trophy assets’ acquisitions and opportunistic developments in high-growth Sun Belt submarkets. It also makes strategic dispositions for a better portfolio mix. The company has recycled more than $1 billion of older assets during the pandemic, helping it shed the slow-growth assets from its portfolio and redeploy the proceeds for developing and acquiring highly differentiated amenitized properties in the Sun Belt submarkets.
Moreover, over the past five years, Cousins Properties has acquired 2.6 million square feet of operating properties, completed 2.2 million square feet of development and sold 5.5 million square feet of operating properties. Its notable development pipeline is likely to deliver meaningful additional annualized net operating income (NOI) in the upcoming years.
Cousins Properties maintains a healthy balance sheet position and exited the second quarter of 2024 with cash and cash equivalents of $5.95 million. As of the same date, it had $317.1 million drawn under its $1 billion credit facility. With considerable liquidity and access to capital markets, the company seems well-placed to bank on long-term growth opportunities.
However, competition from its peers and high supply in the office real estate market is expected to adversely impact its pricing power. High interest rates add to its concerns.
Moreover, Cousins Properties has significant concentration risk in its portfolio. During the second quarter of 2024, Atlanta and Austin contributed 36% and 32.8%, respectively, to the company’s NOI.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Lamar Advertising (LAMR - Free Report) and Crown Castle Inc. (CCI - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Lamar Advertising’s 2024 FFO per share has moved marginally northward in the past month to $8.08.
The Zacks Consensus Estimate for Crown Castle Inc.’s ongoing year’s FFO per share has increased marginally over the past month to $6.97.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.