On Monday, Truist Securities adjusted its outlook for Highwoods Properties Inc. (NYSE: NYSE:HIW), raising the real estate company's price target to $33.00 from the previous $29.00. The firm maintained a Buy rating on the stock, signaling confidence in the company's future performance.
The adjustment follows a reassessment of Highwoods Properties' financial forecast. Truist Securities now expects a decrease in funds from operations (FFO) for the second half of 2024 and the full year of 2025. This revision is primarily attributed to reduced capitalized interest and more prudent leasing projections.
Despite the lowered FFO estimates, Truist Securities anticipates a positive turn for Highwoods Properties, citing an expected occupancy and earnings inflection point early next year. Additionally, potential Federal Reserve interest rate cuts are predicted to benefit funding costs, real estate values, and stock multiples. This outlook is bolstered by the performance of Highwoods' 10-year bonds, which were issued in November at a 7.8% yield and are currently trading at a 6.3% yield.
Highwoods Properties has experienced a notable 33% year-to-date increase in its stock value, outpacing the 1% gain seen by the VNQ, a real estate index fund. Despite this growth, the company's stock is still considered to be trading at a discount, with a forward FFO multiple of 8.6 times for the estimated 2024 figures and an implied capitalization rate of 9.2%.
In other recent news, Highwoods Properties has been in the spotlight following BofA Securities' decision to raise its price target on the company's shares from $23.00 to $25.00, while maintaining a neutral rating. This adjustment comes on the heels of Highwoods Properties' recent quarterly results, which met expectations, with the company's leasing activity standing out by signing 922,000 square feet of leases, a 32% rise above the average for the past four quarters.
In response to robust net operating income, Highwoods Properties has upped the lower end of its same-store net operating income guidance by 50 basis points. However, the company also revised its funds from operations guidance downward by $0.03, reflecting the impact of non-core asset sales and increasing interest rates.
Despite these positive developments, Highwoods Properties foresees potential obstacles ahead, preparing for several significant tenant move-outs over the year and projecting occupancy rates to hit their lowest in early 2025. BofA Securities' maintained neutral rating takes these upcoming challenges into account. These are the latest developments for Highwoods Properties.
InvestingPro Insights
Following Truist Securities' updated price target for Highwoods Properties Inc. (NYSE: HIW), current metrics from InvestingPro show a company with a strong performance and solid investor returns. With a significant return over the last week of 8.77% and an impressive year-to-date price total return of 38.81%, Highwoods Properties is demonstrating robust growth. The stock is also trading near its 52-week high, currently at 99.12% of that peak, which aligns with the positive sentiment from Truist Securities.
InvestingPro Tips highlight that the company has maintained dividend payments for 31 consecutive years, offering a substantial dividend yield of 6.53%, which may appeal to income-focused investors. Additionally, Highwoods Properties is not just profitable over the last twelve months but also has liquid assets that exceed short-term obligations, indicating financial resilience and stability.
For those interested in a deeper dive, there are additional InvestingPro Tips available that could provide further insights into Highwoods Properties' financial health and market position. To explore these tips and more detailed analytics, visit InvestingPro's dedicated page for Highwoods Properties at https://www.investing.com/pro/HIW. Moreover, you can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, ensuring you have the latest data and insights for your investment decisions.
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