Highwoods Reiterated at Neutral - Analyst Blog


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On Jan 8, 2014, we maintained our long-term Neutral recommendation on Highwoods Properties Inc. ( HIW ). Our stance was based on recent guidance increase for 2013, decent third-quarter results and portfolio restructuring activities. However, weak office market scenario and stiff competition remain concerns.

Why Neutral?

Highwoods is making concerted efforts to enhance its portfolio quality through premium assets acquisitions and non-core assets dispositions. Moreover, the company is taking measures to expand its leasing business. As part of this, in December, Highwoods announced the divestiture of several non-core assets worth $88.8 million and an agreement to fully lease the 4301 Research Commons laboratory/office building. It has also slightly raised its funds from operations (FFO) per share outlook for 2013.

Highwoods' third-quarter 2013 core FFO per share of 71 cents beat the Zacks Consensus Estimate by a penny and the prior-year quarter figure by a nickel. Decent results came on the back of higher revenue growth, strong leasing and efficient capital deployment activities.

The company maintains a solid balance sheet and is focused on improving its liquidity position by infusing more capital from time to time. Consequently, In November, Highwoods executed a recast of its $475 million unsecured revolving credit facility and $200 million unsecured bank term loan. The move helped enhance its financial flexibility to capitalize on strategic acquisitions and build-to-suit development opportunities.

However, the weak office market scenario at present and intense competition from commercial property developers remains headwinds for Highwoods. Moreover, rise in consumer purchases through catalogs and the Internet could hurt demand for its retail properties and negatively affect its overall income.

Over the last 60 days, the Zacks Consensus Estimate for 2013 FFO per share remained stable at $2.80. For 2014, it rose by a penny to $2.89. Hence, the stock currently has a Zacks Rank #3 (Hold).

Other Stocks to Consider

Investors interested in the REIT industry may consider stocks like Getty Realty Corp. ( GTY ), CubeSmart ( CUBE ) and National Health Investors Inc. ( NHI ). All these stocks carry a Zacks Rank #1 (Strong 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.

CUBESMART (CUBE): Free Stock Analysis Report

GETTY REALTY CP (GTY): Free Stock Analysis Report

HIGHWOODS PPTYS (HIW): Free Stock Analysis Report

NATL HEALTH INV (NHI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: CUBE , GTY , HIW , NHI

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