Thursday, KeyBanc Capital upgraded Parkway Properties Inc. (PKY) shares to Hold from Underweight. However, the brokerage lowered its 2009 FFO per share estimate by $0.52 to $3.07, and its 2010 estimate by $1.01 to $2.48.
Analyst Jordan Sadler upgraded the stock to reflect the company's improved balance sheet position coupled with the stock's fair valuation. Last week, the company raised $83 million of net cash proceeds through an overnight equity offering, increasing PKY's market cap by 40% and reducing debt outstanding by about 10%, importantly, the issuance served to bolster the company's liquidity position through 2013.
While the analyst expects PKY to continue to see net operating income, or NOI, and earnings deteriorate over the next several quarters as fundamentals remain weak, he views the stock's downside as limited from current levels, PKY trades at a 10.4% implied cap rate on in-place NOI and the stock has a 9.5% dividend yield.
The analyst lowered estimates to reflect: the equity offering; further fundamental weakness; and an anticipated fourth quarter of 2009 lease term fee related to the DHL move-out. The analyst is reducing his NAV estimate from $27.40 to $19.34 per share to reflect a lower NOI run rate and a 25 bp increase in his blended portfolio cap rate to 9.47%.
Currently, PKY is down $0.46 or 3.36% and trading at $13.24.
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