On Apr 1, 2014, Zacks Investment Research upgraded
Duke Realty Corp.
) to a Zacks Rank #2 (Buy). The upgrade of this real estate
investment trust (REIT) came on the back of its solid
fourth-quarter 2013 results and improving operating fundamentals.
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Why the Upgrade?
Duke Realty posted a positive earnings surprise of 7.4% for
fourth-quarter 2013. In particular, the company's core funds from
operations (FFO) of 29 cents per share surpassed both the Zacks
Consensus Estimate and the prior-year quarter FFO per share by 2
cents. Better-than-expected revenues and higher net operating
income attributed to the year-over-year increase.
Moreover, in first quarter 2014, Duke Realty inked a deal with
the freight forwarding wing of
), for a build-to-suit project in East Point, GA. This is
expected to boost the company's industrial assets portfolio.
Also, in recent months, ushering in good news for shareholders of
Duke Realty, Moody's Investors Service, announced the affirmation
of Baa2 senior unsecured and Baa3 preferred ratings of Duke
Realty with a stable outlook. A sound liquidity and modest
progress in credit metrics, aided by solid demand for leasing its
industrial markets, are reflected in Duke Realty's Baa2 senior
unsecured debt rating.
Apart from this, Standard & Poor's Ratings Services upgraded
Duke Realty 's corporate credit and senior unsecured debt ratings
to BBB, from BBB-, with a stable outlook, citing the company's
focus on balance sheet deleverage, favorable fundamentals,
conservatively funding investment activity and managing
development. Favorable ratings play a notable role in preserving
investor confidence in the stock and its creditworthiness in the
Duke Realty continues to make concerted efforts to lower its
suburban office assets as the fundamentals of this market remain
weak. On the other hand, the company is focused on enhancing its
bulk industrial properties and reached its goal of 60% for this
segment's investment. This is expected to reduce cash flow
volatility and bodes well for long-term growth.
Owing to these bullish factors, the tendency for an upward
estimate revision has been obvious in recent times. For the first
quarter 2014, 4 estimates in the last 60 days and 1 estimate over
the last 30 days moved north. But there were no southward
movement in estimates over both time frames. Additionally, the
long-term earnings growth forecast for Duke Realty is 4.41%.
These factors made way for the upgrade.
Other Stocks to Consider
Apart from Duke Realty, investors interested in the REIT industry
Cousins Properties Incorporated
). Both the stocks have a Zacks Rank #2 (Buy).
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.