What's in Store for Boston Properties' (BXP) Q4 Earnings?

Boston Properties, Inc. BXP is scheduled to report fourth-quarter and full-year 2019 results on Jan 28, after the market closes. The company’s results will likely reflect year-over-year growth in funds from operations (FFO) per share and revenues.

In the last reported quarter, this office real estate investment trust’s (REIT) FFO of $1.64 per share surpassed estimates by 1.2%. Results were backed by year-over-year occupancy growth in its in-service office portfolio.

Over the preceding four quarters, the company beat the FFO per share estimates on three occasions and missed in the other, the average positive surprise being 0.45%. This is depicted in the graph below:

Boston Properties, Inc. Price and EPS Surprise

Boston Properties, Inc. Price and EPS Surprise

Boston Properties, Inc. price-eps-surprise | Boston Properties, Inc. Quote

The company’s outlook for its fourth-quarter 2019 FFO per share is $1.84-$1.86. The Zacks Consensus Estimate is pegged at $1.85.

For full-year 2019, Boston Properties expects FFO per share to be $6.98-$7. The Zacks Consensus Estimate for the same is $6.99.

Let’s see how things are shaping up for this announcement.

The U.S. office market continued to witness growth in the fourth quarter, backed by sturdy hiring levels in the labor market. In fact, on an average 184,000 new jobs were added to the market during the October-December quarter. This comes at a time when the U.S economy is at its now record-long, economic expansion cycle. Such an encouraging environment is expected to have propelled healthy leasing activity and rental rate growth in the U.S. office real estate market.

In fact, report from Newmark Knight Frank suggests that the U.S. office market remained stable during fourth-quarter 2019. In fact, vacancy rates shrunk 20 basis points year over year to 12.9%. Further, average asking rate across the nation for the quarter improved 1.3% year over year to $29 per square foot gross full service.

However, absorption in the December-end quarter contracted 4.3 million square feet of space, as compared to the prior-year quarter.

Amid this favorable condition in the office real estate sector, Boston Properties’ portfolio of premium office assets in high barrier-to-entry geographic markets are expected to have enabled the company to enjoy higher rents. In fact, the company is expected to report base rent of $659 million for the quarter under review. This indicates a 21.6% year-over-year improvement.

Base rent growth is anticipated to display a 7.4% year-over-year improvement in rental revenues. Further, the Zacks Consensus Estimate for fourth-quarter 2019 revenues from hotel is pegged at $11.9 million, suggesting marginal growth year on year.

These favorable factors are expected to have boosted Boston Properties’ top-line growth during the quarter. In fact, the Zacks Consensus Estimate for the quarter’s total revenues is pegged at $698.5 million, calling for a 7.3% year-over-year growth.

Also, prior to the to-be-reported quarter’s earnings release, there was lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share for the quarter remained unchanged at $1.85, over the past 30 days. It reflects year-over-year growth of 16.4%.

Earnings Whispers

Our proven model doesn’t conclusively predict a positive surprise in terms of FFO per share for Boston Properties this time around. The combination of a positive Earnings ESP and Zacks Rank #3 (Hold) or better increases the odds of a FFO beat. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earning ESP: Boston Properties has an Earnings ESP of 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Camden Property Trust CPT, set to report quarterly numbers on Jan 30, has an Earnings ESP of +3.75% and carries a Zacks Rank of 2, currently.

Healthpeak Properties, Inc. PEAK, scheduled to release earnings on Feb 11, has an Earnings ESP of +1.8% and carries a Zacks Rank of 3, at present.

Host Hotels & Resorts, Inc. HST, slated to report quarterly figures on Feb 19, has an Earnings ESP of +1.52% and carries a Zacks Rank of 3, currently.

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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