On Jan 2, 2014, we reinstated our long-term Neutral
Duke Realty Corporation
). This is based on the company's decent third-quarter results,
strategic portfolio restructuring activity and a healthy balance
sheet position. Yet stiff competition and a large development
pipeline remain our plausible concerns. Also, the diluting impact
from the suburban office asset divestitures cannot be
Why the Reiteration?
With the improvement in industrial sector, Duke Realty is
repositioning its portfolio to strengthen its bulk industrial
business in key markets. Moreover, the company is making effort
to enhance its medical office portfolio. Notably, the
introduction of the Affordable Act is likely to brighten growth
prospects for Duke Realty as it will widen the insured people
bracket. This will further boost the demand for new outpatient
Notably, aided by improved rental operations and higher net
operating income, Duke Realty's third-quarter 2013 core funds
from operations (FFO) of 28 cents per share was 2 cents higher
than the year-ago figure and in line with the Zacks Consensus
Despite these positives, the company faces stiff competition
from commercial property developers and its large development
pipeline increases operational risks. In addition, Duke Realty's
goal to sell substantial suburban office assets and de-leverage
its balance sheet, are likely to weigh on earnings growth in the
Over the last 60 days, the Zacks Consensus Estimate for 2013
FFO per share remained stable at $1.08. However, the Zacks
Consensus Estimate for 2014 FFO per share dipped 1.8% to $1.12.
Consequently, Duke Realty carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better ranked stocks in the REIT-Equity Trust - Other
PS Business Parks Inc.
). All stocks carry a Zacks Rank #2 (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.
DUKE REALTY CP (DRE): Free Stock Analysis
PUBLIC STORAGE (PSA): Free Stock Analysis
PS BUSINESS PKS (PSB): Free Stock Analysis
VENTAS INC (VTR): Free Stock Analysis Report
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