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CUZ

Cousins Properties NYSE:CUZ Stock Report

Last Price

US$23.35

Market Cap

US$3.5b

7D

-4.2%

1Y

-39.2%

Updated

01 Oct, 2022

Data

Company Financials +

Cousins Properties Incorporated Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Cousins Properties
Historical stock prices
Current Share PriceUS$23.35
52 Week HighUS$42.41
52 Week LowUS$22.71
Beta1.06
1 Month Change-13.04%
3 Month Change-21.25%
1 Year Change-39.21%
3 Year Change-37.72%
5 Year Change-38.29%
Change since IPO-46.93%

Recent News & Updates

Aug 24

Cousins: A High-Quality Office REIT In A Terrible Industry

Summary I'm starting this article by looking into the US office industry, which is seeing high vacancy rates and new supply coming online. Higher rates and lower economic growth make the situation even trickier, resulting in lower office REIT stock prices and lower industry expectations. Yes, Cousins remains in a good spot thanks to a favorable valuation, top-tier assets, and a healthy balance sheet. Introduction In this article, I want to cover what I consider to be the best office REIT. Cousins Properties (CUZ) owns high-quality assets in sought-after states where it enjoys high rental income and high occupancy rates. However, the industry as a whole is in trouble. Vacancy rates are sky-high, interest rates are rising, and the pandemic has done a number on the "new" work environment. For now, Cousins mainly struggles with high-interest rates, yet even in strong years, the stock did not deliver what some investors may have hoped. In other words, in this article, I will walk you through an industry that I wouldn't invest in right now, but also explain why CUZ is one of the best stocks in the industry. As I don't like writing bearish articles, I will give readers a game plan that explains how I would deal with a good company in a tricky industry and uncomfortable market environment. So, bear with me! A Lot Of Supply & Underperformance Over the past 2 years, we have discussed pretty much every shortage imaginable. One "thing" that hasn't seen a shortage is office space. If anything, supply increased as companies started to implement long-term (partial) work-from-home options for employees. Especially in Europe, some companies have completely ended a 5-day office workweek and reduced it to 3 days of work from home. This obviously differs per country and company, but you get the point. The other day, The Wall Street Journal published an article highlighting the issues facing this industry, which started well before the pandemic and are much worse than I previously assumed - to be completely honest. Wall Street Journal Essentially, America's office glut has been in the making for decades as a result of federal tax breaks, low-interest rates, and high demand from (often unprofitable) startups. It was made worse as a lot of landlords were unable or not allowed to turn older, vacant properties into properties for other uses. This has now resulted in an office surplus that is far worse than the situation overseas. According to The Wall Street Journal: About 19% of U.S. office space was vacant in the second quarter, compared with 14% in the Asia-Pacific region and 7% in Europe, the Middle East and Africa, according to brokerage JLL. Analysts expect that share to grow as more leases expire and more companies cut down on their real estate. Wall Street Journal A trend that was fueled by a change in the tax code in 1981 that allowed investors to depreciate commercial real estate more quickly is now threatening tax income from major cities that rely on so-called "cubicle farms". In 2008, the first wave of the meltdown started as companies cut costs given low economic growth. Yet, demand kept rising due to substantial tax breaks and subsidies that went into projects like New York's Hudson Yards and the new World Trade Center. New supply is well-below levels witnessed in the 1980s, but still at high levels given that the pandemic added a new layer of problems. Wall Street Journal The bottom line is that demand could fall by another 20% over the next few years, although expectations vary tremendously. Supply, on the other hand, could rise by another 6.5% over the next few years with 2.2% being currently under construction according to CommercialEdge. CommercialEdge (Via Yardi Matrix) Now, with that said, office real estate hasn't been a good investment. Below, I'm backtesting a number of investments starting at the bottom of the Great Financial Crisis, to give real estate a benefit. Since 2010, the S&P 500 has returned 13.0% per year with a standard deviation of 14.4%. That's a terrific performance. High-yield stocks have returned 11.9% per year with a lower standard deviation, achieving an equal volatility-adjusted return (Sharpe/Sortino ratios). Real estate stocks have returned 10.1%, which isn't bad either. Unfortunately, Cousins Properties - like its office peers - has underperformed. Even starting at the bottom of the recession, the stock has returned just 5.8% per year with a standard deviation of 23.6%. That's weak and results in a disappointing volatility-adjusted return. Portfolio Visualizer With that said, Cousins isn't a worthless investment, as I believe that it's one of the best office REITs around - if you want to buy exposure in the industry. Cousins Properties Has Value Cousins is the 6th-largest office REIT in the United States, with a $4.5 billion market cap. The company has 100% of its assets in the Sun Belt, where it enjoys Class A locations for all of its assets. Atlanta and Austin alone account for 68% of net operating income. The company has relatively young assets as 2004 is the average year its properties were built. Roughly a third is younger than five years old. Cousins Properties Thanks to its geographic location and office assets, the company benefits from the flight to never, highly-amenitized assets as well as the migration to Sun Belt states, which started to accelerate after the pandemic. Using the latest data, the company's core markets were all top migration destinations. www.census.gov (Via Wikipedia) The good thing is the company's assets don't just make sense on paper, but also in reality. The company's asking rents are 9% higher than pre-pandemic levels and 25% higher than its Class A average peers. Cousins Properties Moreover, 90.6% of the company's assets are leased. This includes 310 basis points of recent re-leasing wins. On paper, the current occupancy rate is 87%. This means the company's average vacancy is below 10%. That's a fantastic number as Boston is the only metro area with a number better than that. Even go-to markets have higher vacancy rates according to a recent report from CommercialEdge. CommercialEdge (Via Yardi Matrix) On top of that, only 17% of leases expire over the next 2 years (until 2024), which is well below the industry average of 27%. Organic growth plans are mainly based on getting the occupancy rate back to 93%, which is the company's longer-term average. While the company's downtrend in occupancy isn't as bad as the chart suggests given the recent re-leasing wins, there is a downtrend, and I hope the company can turn it around. If industry fundamentals are any indication, downside pressure is high. Cousins Properties Adding to the list of bad news, the Federal Reserve is aggressively hiking rates. The market expects the central bank to hike rates to at least 350 basis points going into next year. More on this in the "valuation" part of this article. CME Group This is impacting Cousins' fundamentals. According to the company: [...], the Federal Reserve has begun tightening financial conditions. The result is higher interest rates and a slowing economy. Not surprisingly, many companies are announcing plans to slow hiring and in some cases, layoffs. The company isn't worried as it owns top-tier real estate in strong markets and its $566 million development pipeline is 70% pre-leased. Moreover, the company's net debt ratio is just 4.9x (EBITDA), which is well below the sector average of 7.3x. This also means that the company is in a good spot to protect its dividend. As of Q2 22, the company's FAD (funds available for distribution) payout ratio was 70.6%. Since 2017, FAD has grown by 23% with constant growth if we exclude the COVID impact in 2020. Cousins Properties Now, with that said, the CUZ dividend isn't that bad. The company currently pays a $0.32 per share per quarter dividend. That's $1.28 per year and translates to a 4.5% yield. That's one of the highest yields in recent history. Note that the 2017 dividend cut was the result of a spin-off, which did not change the distribution policy. CUZ Dividend data by YCharts The most recent hike was announced in March when the company hiked by 3.2%. In March 2021, CUZ hiked by 3.3% after a 3.4% hike in March 2020. In March 2019, the company hiked by 11.5%.

Shareholder Returns

CUZUS REITsUS Market
7D-4.2%-4.1%-2.5%
1Y-39.2%-20.4%-23.2%

Return vs Industry: CUZ underperformed the US REITs industry which returned -20.4% over the past year.

Return vs Market: CUZ underperformed the US Market which returned -23.2% over the past year.

Price Volatility

Is CUZ's price volatile compared to industry and market?
CUZ volatility
CUZ Average Weekly Movement3.9%
REITs Industry Average Movement4.1%
Market Average Movement6.9%
10% most volatile stocks in US Market15.6%
10% least volatile stocks in US Market2.8%

Stable Share Price: CUZ is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: CUZ's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
1958294Michael Connollyhttps://www.cousins.com

Cousins Properties is a fully integrated, self-administered and self-managed real estate investment trust (REIT). The Company, based in Atlanta, GA and acting through its operating partnership, Cousins Properties LP, primarily invests in Class A office towers located in high-growth Sun Belt markets. Founded in 1958, Cousins creates shareholder value through its extensive expertise in the development, acquisition, leasing and management of high-quality real estate assets.

Cousins Properties Incorporated Fundamentals Summary

How do Cousins Properties's earnings and revenue compare to its market cap?
CUZ fundamental statistics
Market CapUS$3.54b
Earnings (TTM)US$283.36m
Revenue (TTM)US$761.01m

12.5x

P/E Ratio

4.6x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
CUZ income statement (TTM)
RevenueUS$761.01m
Cost of RevenueUS$256.44m
Gross ProfitUS$504.57m
Other ExpensesUS$221.21m
EarningsUS$283.36m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 27, 2022

Earnings per share (EPS)1.87
Gross Margin66.30%
Net Profit Margin37.23%
Debt/Equity Ratio49.8%

How did CUZ perform over the long term?

See historical performance and comparison

Dividends

5.5%

Current Dividend Yield

45%

Payout Ratio

Does CUZ pay a reliable dividends?

See CUZ dividend history and benchmarks
When do you need to buy CUZ by to receive an upcoming dividend?
Cousins Properties dividend dates
Ex Dividend DateOct 04 2022
Dividend Pay DateOct 14 2022
Days until Ex dividend1 day
Days until Dividend pay date11 days

Does CUZ pay a reliable dividends?

See CUZ dividend history and benchmarks