Shares of Cousins Properties CUZ have rallied 30.5% over the past six months, outperforming the industry's growth of 15.2%.

Early November, Cousins Properties announced its agreement to acquire Vantage South End, a 639,000-square-foot lifestyle office property in Charlotte’s South End submarket, for $328.5 million. This strategic acquisition aligns with Cousins’ Sun Belt-focused strategy and enhances its presence in one of Charlotte's most dynamic submarkets.

Last month, this office real estate investment trust (REIT) reported third-quarter 2024 funds from operations (FFO) per share of 67 cents, which met the Zacks Consensus Estimate. Results reflected strong leasing activity and higher rent realizations amid rising demand for office spaces. The company, currently carrying a Zacks Rank #3 (Hold), raised its guidance for 2024 FFO per share.

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Factors Behind CUZ Stock’s Price Surge: Will the Trend Last?

Cousins Properties’ trophy portfolio of Class A office assets in the high-growth Sun Belt markets is poised to benefit as the region is experiencing a population influx. Amid favorable migration trends and a pro-business environment, corporate relocations and expansions in the Sun Belt markets have gained pace, and this is driving the demand for office space.

As a result, CUZ is witnessing a recovery in demand for its strategically located office properties, as reflected by the rebound in new leasing volume. For the nine months ended Sept. 30, 2024, the company executed 114 leases for a total of 1,557,135 square feet of office space with a weighted average lease term of 7.8 years.

Cousins Properties enjoys a well-diversified, high-end tenant roster with less dependence on a single industry. This enables it to enjoy steady revenues over different economic cycles. The company is also seeing many tenants returning to offices or announcing plans to report to workplaces. This is likely to support office market fundamentals in its markets.

CUZ makes concerted efforts to upgrade portfolio quality with trophy assets’ acquisitions and opportunistic developments in high-growth Sun Belt submarkets. From 2019 through Oct. 24, 2024, apart from the TIER REIT transaction, the company acquired 3.6 million square feet of operating properties, completed 2.2 million square feet of development and sold 5.5 million square feet of operating properties. Its notable development pipeline is likely to deliver meaningful additional annualized net operating income (NOI) in the upcoming years.

Cousins Properties maintained a healthy balance sheet position and exited the third quarter of 2024 with cash and cash equivalents of $76.1 million, with no amount drawn under its $1 billion credit facility. As of Sept. 30, 2024, CUZ had a net debt-to-annualized EBITDAre ratio of 5.10. With considerable liquidity and access to capital markets, the company seems well-placed to bank on long-term growth opportunities.

Key Risks for CUZ

Competition from peers is expected to affect Cousins Properties’ pricing power. Moreover, CUZ has a significant concentration risk in its portfolio, and any economic or political downturn in its markets is likely to affect its performance.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Iron Mountain IRM and Welltower WELL, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Iron Mountain’s 2024 FFO per share is pegged at $4.49, up 8.98% year over year.

The Zacks Consensus Estimate for Welltower’s 2024 FFO per share is pegged at $4.26, up 17.03% year over year.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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