Tuesday, KeyBanc Capital upgraded Parkway Properties Inc. (PKY) shares to Buy from Hold with a price target of $17.
Analyst Jordan Sadler attributed the upgrade based on valuation, better fundamentals, a stable capital position and improved expectations management. PKY's second quarter results came in better than expected on expense management, while leasing activity accelerated dramatically to help support near term occupancy.
The analyst said that after a period of excessive leverage and downside earnings surprises, management appears to be back on track, the company has met or exceeded Street earnings estimates over the last three quarters and conditions appear to have stabilized somewhat.
While the company's premium 9.5% dividend yield remains attractive, the analyst views the payout ratio as a bit excessive for the current capital environment, in which cash is king. In any event, PKY is attractive at 8.9x the analyst's 2010 deleveraged FFO estimate, which represents a 38% and a 40% discount to the office REIT and the REIT sector averages, respectively.
Currently, PKY is up $2.22 or 16.16% and trading at $15.96.
For comments and feedback: editorial@rttnews.com