Here’s why it’s wise to hold on to Highwoods (HIW) stock now
Highwoods Properties, Inc.HIW’s portfolio is focused on high growth Sun Belt markets with favorable long term demographic trends. In addition, HIW has a well-diversified tenant base. This bodes well for its long-term growth.
Highwoods continues to make concerted efforts to expand its presence in the high growth markets of the best business districts and improve the quality of its overall portfolio through acquisitions and development. As part of its strategy to strengthen its presence in target markets, HIW acquired four Class A office assets, covering 1.63 million square feet in Charlotte and Raleigh, in July from Preferred Apartment Communities.
HIW focuses on development projects in key markets that have the potential to generate significant annual net operating income (NOI) when completed and stabilized.
Highwoods has a well-diversified tenant base that includes several metrics. Going forward, the next round of office space demand will likely be driven by inbound migration and significant investments announced by office occupants to expand their footprint in the Sun Belt regions. In addition, additional hiring plans in HIW’s markets will stimulate said demand.
Additionally, HIW is seeing an increasing number of tenants returning to offices or announcing plans to get to work. This development should also support the fundamentals of office real estate.
HIW has sufficient liquidity from its liquidity, cash flow from operating activities and other funding sources to meet its short-term liquidity needs.
The REIT ended the third quarter of 2021 with $ 27.9 million in cash and cash equivalents. Debt maturities are well phased and no maturities are scheduled until November 2022. In addition, Highwoods generates an unencumbered NOI of 91.3%, allowing additional secured debt capital to be leveraged if necessary.
Zacks Rank # 3 (Hold) HIW stocks have outperformed their industry over the past three months. The title rose 3%, while the industry gained 2.7%.
Image source: Zacks Investment Research
However, Highwoods faces intense competition from developers, owners and operators of office buildings as well as other commercial buildings, including sublet space available from its tenants. This limits its ability to attract and retain tenants at relatively higher rents than its competitors and hinders its rental business.
In addition, a large development pipeline exposes it to various operational risks, such as construction cost overruns and development delays.
Choice of keys
Some top-ranked stocks in the REIT sector are Cedar Real Estate Trust CDR, OUTFRONT media OUT and Apple Hotel REIT APLE.
Zacks’ consensus estimate for Cedar Realty Trust’s current year operating fund (FFO) per share was increased 2.6% over the past month. The CDR is currently showing a Zacks Rank # 1 (strong buy). You can see The full list of today’s Zacks # 1 Rank stocks here.
In the past four quarters, Cedar Realty’s FFO per share has exceeded the consensus estimate twice and missed the mark on the other two with the average surprise being 6.40%. CDR shares have appreciated 58.4% over the past six months, outperforming the industry rally by 8.3%.
Zacks’ consensus estimate for the 2021 FFO per share of OUTFRONT Media was increased by 13.8% over the past month. OUT is currently wearing a Zacks Rank 1.
In the past four quarters, OUTFRONT Media’s FFO per share has exceeded the consensus estimate three times and has published results online once. OUT delivered a surprise of 44.87% on average. OUT shares have appreciated 14.9% over the past six months, outperforming the industry rally by 8.4%.
Zacks’ consensus estimate for FFO per share of Apple Hospitality REIT in 2021 rose 4.9% north over the past month. APLE currently carries a Zacks Rank # 2 (Buy).
In the past four quarters, Apple Hospitality’s FFO per share has exceeded the consensus mark three times and missed it once, with negative surprise being 14.2%. Shares of APLE have appreciated 9.3% over the past three months, outperforming the industry rally by 2.7%.
To note: Everything related to earnings presented in this valuation represents funds from operations (FFOs) – a measure widely used to assess the performance of REITs.
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
Highwoods Properties, Inc. (HIW): Free Stock Analysis Report
Cedar Realty Trust, Inc. (CDR): Free Inventory Analysis Report
OUTFRONT Media Inc. (OUT): Free Stock Analysis Report
Apple Hospitality REIT, Inc. (APLE): Free Inventory Analysis Report
To read this article on Zacks.com, click here.
Zacks investment research