Boston Properties (BXP) to Post Q4 Earnings: What's in Store?
Boston Properties, Inc. BXP is slated to report fourth-quarter and full-year 2022 results on Jan 31, after market close. Its quarterly results are likely to reflect year-over-year growth in both funds from operations (FFO) per share and revenues.
In the last reported quarter, this office real-estate investment trust (REIT) delivered a surprise of 2.14% in terms of FFO per share. BXP’s performance during the quarter reflected healthy leasing activity and bottom-line growth.
Over the preceding four quarters, Boston Properties’ FFO per share surpassed the Zacks Consensus Estimate on each occasion, the average beat being 3.39%. This is depicted in the graph below:
Boston Properties, Inc. Price and EPS Surprise
Boston Properties, Inc. price-eps-surprise | Boston Properties, Inc. Quote
Factors at Play
Per a Cushman & Wakefield CWK report, the U.S. office market has been experiencing a decline in demand for office space, with overall office absorption negative in each quarter of 2022. The fourth quarter marked the 10th quarter in the past 11, wherein the overall office absorption was negative. Moreover, with remote and hybrid work systems, office space per office worker has been shrinking.
The overall gross leasing activity declined for two consecutive quarters after hitting 387 million square feet (msf) in second-quarter 2022. The same for the four quarters ending fourth-quarter 2022 was recorded at 339 msf.
The national vacancy, too, soared to historical highs driven by occupiers placing oversubscribed space on the sublease market. It rose 140 basis points year over year to 18.2%. The national asking rent came in at $37.38 for the fourth quarter.
Nonetheless, per the Cushman & Wakefield report, gross leasing for 2022 was 5% above the 20-year historical average, implying that the leasing market remains very active despite businesses continuing to downsize.
Boston Properties’ portfolio of modern, class A office buildings is likely to have benefited from the flight-to-quality preference of office tenants. This makes us optimistic about BXP’s fourth-quarter results.
Also, BXP’s life-science assets are anticipated to have witnessed solid demand during the quarter on the back of the growing need for drug research and innovation.
The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $732.9 million, suggesting growth of 6.1% from the prior-year quarter’s reading. Also, the consensus estimate for quarterly parking and other revenues is pegged at $28.02 million, implying a 21.4% increase from the year-ago period’s reported number.
In the December quarter, BXP disposed of The Avant at Reston Town Center in Reston, VA, for $141 million. This move was part of the company’s capital-reallocation strategy focused on expanding into the growing Seattle market. The sellout completed the exchange in connection with the $730 million acquisition of Madison Centre in Seattle.
Such efforts highlight the company’s prudent capital management practices and relieve the pressure off its balance sheet.
The Zacks Consensus Estimate for the quarterly FFO per share has been revised marginally upward to $1.84 over the past week. Moreover, the same suggests an 18.7% increase from the prior-year period’s reported number.
For the full year, the Zacks Consensus Estimate for FFO per share has been unchanged at $7.51 over the past month. Nonetheless, the figure indicates a 14.5% increase year over year on revenues of $2.91 billion.
Our proven model does not conclusively predict an FFO beat for Boston Properties this time. The right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that is not the case here.
Earnings ESP: Boston Properties has an Earnings ESP of -0.47%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Boston Properties currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Warrant a Look
Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:
Highwoods Properties HIW is slated to release fourth-quarter earnings on Feb 7. HIW has an Earnings ESP of +0.41% and a Zacks Rank #3 at present.
Equinix EQIX is scheduled to report quarterly figures on Feb 15. EQIX has an Earnings ESP of +0.54% and a Zacks Rank #3 currently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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