Critical Analysis: Piedmont Office Realty Trust (PDM) and Howard Hughes (HHC)

Piedmont Office Realty Trust (NYSE: PDM) and Howard Hughes (NYSE:HHC) are both mid-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, profitability, dividends and analyst recommendations.

Analyst Ratings

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This is a breakdown of recent ratings and price targets for Piedmont Office Realty Trust and Howard Hughes, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Piedmont Office Realty Trust 1 1 1 0 2.00
Howard Hughes 0 1 1 0 2.50

Piedmont Office Realty Trust currently has a consensus target price of $20.67, indicating a potential upside of 15.59%. Howard Hughes has a consensus target price of $145.00, indicating a potential upside of 5.12%. Given Piedmont Office Realty Trust’s higher probable upside, research analysts clearly believe Piedmont Office Realty Trust is more favorable than Howard Hughes.

Dividends

Piedmont Office Realty Trust pays an annual dividend of $0.84 per share and has a dividend yield of 4.7%. Howard Hughes does not pay a dividend. Piedmont Office Realty Trust pays out 91.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Howard Hughes has increased its dividend for 4 consecutive years.

Profitability

This table compares Piedmont Office Realty Trust and Howard Hughes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Piedmont Office Realty Trust 23.26% 1.16% 0.58%
Howard Hughes 15.31% 2.52% 1.12%

Earnings and Valuation

This table compares Piedmont Office Realty Trust and Howard Hughes’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Piedmont Office Realty Trust $574.17 million 4.21 $133.56 million $0.92 19.43
Howard Hughes $1.10 billion 5.44 $168.40 million $3.90 35.37

Howard Hughes has higher revenue and earnings than Piedmont Office Realty Trust. Piedmont Office Realty Trust is trading at a lower price-to-earnings ratio than Howard Hughes, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

88.4% of Piedmont Office Realty Trust shares are owned by institutional investors. Comparatively, 83.9% of Howard Hughes shares are owned by institutional investors. 0.8% of Piedmont Office Realty Trust shares are owned by insiders. Comparatively, 20.7% of Howard Hughes shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Risk and Volatility

Piedmont Office Realty Trust has a beta of 0.6, meaning that its stock price is 40% less volatile than the S&P 500. Comparatively, Howard Hughes has a beta of 1.29, meaning that its stock price is 29% more volatile than the S&P 500.

Summary

Howard Hughes beats Piedmont Office Realty Trust on 12 of the 16 factors compared between the two stocks.

About Piedmont Office Realty Trust

Piedmont Office Realty Trust, Inc. is an integrated self-managed real estate investment trust (REIT). The Company’s business consists primarily of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of office real estate assets. As of December 31, 2016, the Company owned and operated 65 in-service office properties, one redevelopment asset, two development assets and one office building through an unconsolidated joint venture. Its properties are located in areas, including New York, Chicago, Atlanta, Dallas, Boston, Minneapolis and Orlando. Its tenant base includes industries, such as business services, depository institutions, educational services, real estate, legal services and insurance carriers. The Company conducts business primarily through Piedmont Operating Partnership, L.P. (Piedmont OP). It performs the management of its buildings through its subsidiaries, including Piedmont Government Services, LLC and Piedmont Office Management, LLC.

About Howard Hughes

The Howard Hughes Corporation owns, manages, and develops commercial, residential, and mixed-use real estate properties in the United States. It operates in three segments: Master Planned Communities, Operating Assets, and Strategic Developments. The Master Planned Communities segment develops and sells residential and commercial land. This segment sells residential land designated for detached and attached single family homes ranging from entry-level to luxury homes to home builders; and commercial land parcels designated for retail, office, hospitality, and high density residential projects, as well as services and other for-profit activities, and parcels designated for use by government, schools, and other not-for-profit entities. As of December 31, 2017, this segment had 11,031 remaining saleable acres of land. The Operating Assets segment owns 13 retail, 25 office, 6 multi-family, and 3 hospitality properties, as well as 10 other operating assets and investments primarily located in and around Columbia, Maryland; Honolulu, Hawaii; Las Vegas, Nevada; New York, New York; and The Woodlands, Texas. The Strategic Development segment comprises residential condominium and commercial property projects. The company was founded in 2010 and is headquartered in Dallas, Texas.

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