Shares of Highwoods Properties Inc. (HIW) touched a new 52-week high of $45.32 on Dec 26. However, the stock closed the session at $45.11, reflecting a solid return of 29.8% in a year’s time. The trading volume for the session was 253,667 shares.
Currently, this equity real estate investment trust carries a Zacks Rank #3 (Hold). The long-term expected earnings per share growth rate for this regional bank now stands at 5.84%.
Growth Drivers
Highwoods presently focuses on expanding its footprint in high-growth markets through acquisitions and developments of premium assets. Simultaneously, the company is shedding its non-core assets and utilizing the proceeds for further expansion. Consequently, a large part of Highwoods portfolio is concentrated in the high-growth Sun Belt markets.
Notably, in early December, the company announced the acquisition of a Class A office building – Lincoln Plaza – in CBD Orlando for an expected total investment of $68.3 million. The company acquired this asset aided by borrowings from revolving credit facility, and proceeds from the ATM program and non-core asset divestitures.
In November, Highwoods announced a contract of constructing Build Bridgestone Americas' SoBro Headquarters (a 30-story, 514,000 square feet Class A building) for around $200 million. These developments have primarily driven the share price to a new high.
On Oct 28, Highwoods reported third-quarter 2014 funds from operations (“FFO”) of 70 cents per share, which missed the Zacks Consensus Estimate by 3 cents, but came in line with the prior-year quarter figure.
The company has a huge development pipeline of $349 million as of Sep 30, 2014. Although this is encouraging, it also adds to operational risks by exposing the company to increasing construction costs, entitlement delays and lease-up risks.
The Zacks Consensus Estimates for both 2014 and 2015 have remained unchanged at $2.90 and $3.03 per share, respectively, over the last 30 days.
Other Stocks to Consider
Some better-ranked stocks in this space include Ashford Hospitality Trust, Inc. (AHT), Corrections Corporation of America (CXW) and Arbor Realty Trust Inc. (ABR). While both Ashford Hospitality Trust and Corrections Corporation sport a Zacks Rank #1 (Strong Buy), Arbor Realty Trust holds 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.
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