Ushering in good news for the shareholders of
Duke Realty Corp.
), Moody's Investors Service, the rating arm of Moody's
Corporation (MCO), announced the affirmation of Baa2 senior
unsecured and Baa3 preferred ratings of Duke Realty with a stable
The rating affirmation of Duke Realty is encouraging. In fact,
this plays a major role in preserving investor confidence in the
stock and its creditworthiness in the market. A sound liquidity
and modest progress in credit metrics, aided by solid demand for
leasing for its industrial markets, are reflected in Duke
Realty's Baa2 senior unsecured debt rating.
Moreover, this real estate investment trust's (REIT)
well-diversified tenant base and a proven track record support
its current rating. However, though its fixed charge coverage is
improving, it remains low and its leverage level is somewhat
higher for the current rating grade.
As a matter of fact, Duke Realty has made concerted efforts to
lower its suburban office assets as the fundamentals of this
market remain weak. On the other side, the company is focused on
enhancing its bulk industrial properties and reached its goal of
60% for this segment's investment. As a result, the rating agency
opines that the move would substantially lower volatility in cash
Furthermore, the rating agency remains optimistic about Duke
Realty and expects it to lower its leverage level and improve
fixed coverage with its new developments coming in service as
well as leasing of vacant space. This is reflected in the stable
outlook provided by the rating agency.
Notably, Duke Realty reported a positive earnings surprise of
7.4% in fourth-quarter 2013. Aided by better-than-expected
revenues and higher net operating income, the company's core FFO
(funds from operations) came in at 29 cents per share.
Duke Realty currently holds a Zacks Rank #3 (Hold). Investors
interested in the REIT industry may also consider stocks like
Cousins Properties Inc.
Omega Healthcare Investors Inc.
). All these stocks currently 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.
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