Yahoo Finance Key Factors to Impact Boston Properties' (BXP) Q1 Earnings
Boston Properties, Inc. BXP is slated to report first-quarter 2024 results on Apr 30, after market close. While its quarterly results are likely to reflect year-over-year growth in revenues, funds from operations (FFO) per share are expected to remain unchanged.
In the last reported quarter, this office real-estate investment trust (REIT) delivered a surprise of 0.55% in terms of FFO per share. The quarterly results reflected better-than-anticipated revenues on healthy leasing activity. However, high interest expenses during the quarter marred its year-over-year FFO per share growth.
Over the preceding four quarters, Boston Properties’ FFO per share surpassed the Zacks Consensus Estimate on all occasions, the average beat being 1.55%. This is depicted in the graph below:
Boston Properties, Inc. Price and EPS Surprise
Boston Properties, Inc. price-eps-surprise | Boston Properties, Inc. Quote
US Office Market
Per a Cushman & Wakefield CWK report, the high interest rate environment, hybrid and remote work strategies and slower office-using employment growth compared to the U.S. job market continued to keep occupiers cautious about office leasing decisions in the first quarter.
The first quarter of 2024 marked the ninth straight quarter for office demand being negative. Net absorption for the quarter was a negative 31 million square feet (msf), bringing the four-quarter rolling total to a negative 78 msf.
The first-quarter national vacancy rate reached 20.2%, increasing 70 basis points (bps) sequentially and 210 bps year over year. The national asking rent came in at $37.77 in the quarter.
Nonetheless, the Cushman & Wakefield report highlights that despite the weaker trends at the national level, demand for office spaces outperforms in some markets, with 26 of the 90 U.S. markets tracked by the company reporting positive net absorption in the first quarter.
Across a fifth of U.S. markets, vacancy fell, and it remained below 15% in 34 of the markets. Class A vacancy declined quarter over quarter in 32 of the 93 U.S. markets that were followed by Cushman & Wakefield.
Projections
Boston Properties owns a portfolio of class A office buildings concentrated in a few select high-rent, high-barrier-to-entry geographic markets of Boston, Los Angeles, New York, San Francisco, Seattle and Washington, DC. Given the improving demand for top-tier assets with class-apart amenities, the company’s properties are likely to have witnessed healthy leasing activity.
There is a solid demand for life-science assets amid the increasing need for drug research and innovation. Against this backdrop, the demand for BXP’s life-science assets is anticipated to have fared well during the first quarter. The company is converting numerous straight office buildings to laboratory/life science spaces in its suburban portfolio, especially its Kendall Center project, which is one of the leading preferred locations for life science clients in the world. Such efforts are likely to have given it an edge.
Long-term lease agreements with a diverse tenant base across industries having a solid credit profile are expected to have led to stable revenue generation during the to-be-reported quarter, boosting the top line.
The Zacks Consensus Estimate for first-quarter revenues is pegged at $768.91 million, suggesting growth of 1.59% from the prior-year quarter’s reported number.
The consensus estimate for quarterly parking and other revenues is pegged at $28.63 million, up from $24.01 million reported in the year-ago period.
A solid balance sheet position is likely to have supported its development activities in the quarter.
However, the elevated supply of office properties in some markets where the company operates is anticipated to have cast a pall on its quarterly performance to a certain extent. The rising supply is escalating competition from developers, owners and operators of office properties and other commercial real estate. This is likely to have partly limited BXP’s ability to retain tenants at relatively higher rents and/or backfill tenant move-outs and vacancies.
Further, high interest expenses are expected to have been a spoilsport. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. Our estimate suggests a year-over-year rise of 7.9% in BXP’s first-quarter interest expenses.
Boston Properties’ activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has remained unrevised at $1.73 over the past month, suggesting no change from the year-ago quarter’s tally.
What Our Quantitative Model Predicts
Our proven model predicts a likely surprise in terms of FFO per share for Boston Properties this quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.
Boston Properties has an Earnings ESP of +0.15% and currently carries a Zacks Rank of 3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Park Hotels & Resorts PK and CBRE Group CBRE — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Park Hotels, scheduled to report quarterly numbers on Apr 30, has an Earnings ESP of +3.66% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
CBRE is slated to report quarterly numbers on May 3. CBRE has an Earnings ESP of +2.60% and carries a Zacks Rank of 3 presently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Boston Properties, Inc. (BXP) : Free Stock Analysis Report
Park Hotels & Resorts Inc. (PK) : Free Stock Analysis Report
CBRE Group, Inc. (CBRE) : Free Stock Analysis Report
Cushman & Wakefield PLC (CWK) : Free Stock Analysis Report
