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Investing.com - Morgan Stanley (NYSE:MS) raised its price target on Highwoods Properties Inc. (NYSE:HIW) to $23.00 from $22.00 while maintaining an Underweight rating on the stock. Currently trading at $30.22, the REIT offers a substantial 6.59% dividend yield and has maintained dividend payments for 32 consecutive years, according to InvestingPro data.
The firm cited challenges for the diversified office REIT, which has exposure to major metropolitan areas across the Sun Belt region.
Morgan Stanley expressed concern that elevated vacancy rates and rising supply deliveries could make it difficult for Highwoods Properties to lease up its large 2024/2025 lease expirations and development pipeline.
The firm’s base case projects modest occupancy declines in 2025, which combined with interest cost headwinds could lead to negative funds from operations (FFO) growth.
Morgan Stanley’s new price target applies a 6.6x multiple on its 2026 estimated FFO for the company.
In other recent news, Highwoods Properties reported its first-quarter 2025 earnings, significantly exceeding analyst expectations with an earnings per share (EPS) of $0.91, compared to the forecasted $0.22. The company’s revenue was slightly below expectations at $200.38 million, against an expected $202.95 million. Despite this minor revenue shortfall, Highwoods raised its 2025 funds from operations (FFO) outlook, reflecting confidence in its future performance. Additionally, the company announced robust leasing activity in the second quarter, with leases totaling over 750,000 square feet, including 300,000 square feet of new leases.
In other developments, Truist Securities downgraded Highwoods Properties from Buy to Hold, citing concerns about the office sector and projecting less attractive earnings growth rates for the company compared to other real estate investment trusts (REITs). Despite this, Highwoods remains focused on its strategy of owning and managing office properties in prime business districts, with a strong leasing pipeline and ongoing development projects. The company has also been actively recycling assets, selling non-core properties and acquiring high-quality buildings in desirable locations. These recent developments highlight the dynamic environment in which Highwoods Properties operates, with significant leasing activity and strategic asset management efforts underway.
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