UPDATE: UBS Upgrades Duke Realty (DRE) to Buy

UBS upgraded Duke Realty (NYSE: DRE) from Neutral to Buy with a price target of $23. Analyst Jeremy Metz noted discount valuation and solid industrial outlook.

"As the company finishes shedding non-core assets, we think the increasingly cleaner story should help the new look DRE continue to re-rate as it becomes a purer play on industrial," said Metz.

"With over $3B of asset sales since the start of 2013 including ~$1.4B in 2Q15, DRE continues to actively reposition the portfolio away from non-core suburban office/light industrial and into bulk industrial. DRE will look to further pare back office from ~11% of NOI today to under 5% by YE16. Though there is still some wood to chop (we est another $600-$700m of add'l sales over the next 12-18 months), the bulk of the heavy lifting appears to be behind DRE at this stage having already cut office exposure from >50% of NOI in 2009. In turn, this should provide a better runway for earnings, NAV, and eventually dividend growth. Furthermore, we think recent/pending sales have positioned DRE to fund its $550m development pipeline (45% pre-leased, 7.1% yields) and upcoming maturities without needing any additional external capital," added the analyst.

For an analyst ratings summary and ratings history on Duke Realty click here. For more ratings news on Duke Realty click here.

Shares of Duke Realty closed at $20.01 yesterday.

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