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Growth & Income

Boston Properties, Inc. (BXP - Analyst Report) recently delivered its 6th consecutive positive earnings surprise on double-digit revenue and funds from operation (FFO) growth.

Boston Properties is displaying very strong earnings momentum as analysts have been steadily raising their estimates over the last several months. It is a Zacks #2 Rank (Buy) stock.

Based on current consensus estimates, analysts are projecting 10% FFO growth this year and 7% growth next year. In addition to this, the company pays a dividend that yields 2.3%.

REIT

Boston Properties, Inc. is a real estate investment trust (REIT) that owns and manages first class office properties in 5 markets: Boston, Washington, D.C., Midtown Manhattan, San Francisco, and Princeton, New Jersey.

The company is headquartered in Boston and has a market cap of $12.7 billion.

Second Quarter Results

Boston Properties delivered better than expected results for the second quarter of 2011. FFO came in at $1.23, beating the Zacks Consensus Estimate by 5 cents. It was a 10% increase over the same quarter in 2010.

Total revenue rose 11% to $436.5 million, well ahead of the Zacks Consensus Estimate of $421.0 million. Base rent revenue jumped 14% year-over-year, but occupancy rates declined 130 basis points to 91.9%.

The Midtown Manhattan and Greater Washington, D.C. markets remained the strongest with 96.5% and 95.9% occupancy rates, respectively.

Outlook

Following strong Q2 results, management gave full year guidance for 2011. The company expects to earn between $4.78 and $4.83 per share and stated that it believes that rental rates and occupancy levels in all of its markets have stabilized. This prompted analysts to significantly raise their estimates for both 2011 and 2012, sending the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate for 2011 is at the upper end of guidance at $4.83, representing 10% FFO growth per share in 2011. The 2012 consensus estimate is currently $5.15, corresponding with 7% FFO growth.

As you can see in the company's Price & Consensus chart, analysts have been steadily raising their estimates over the last several months as Boston Properties has delivered 6 consecutive positive earnings surprises:

BXP: Boston Properties, Inc.

Dividend

As a REIT, Boston Properties must pay out at least 90% of earnings to shareholders in the form of dividends to avoid paying tax on that money. The company currently pays a dividend that yields 2.3%.

Boston Properties did cut its dividend by 26% in mid-2009, however, and has not raised it since.

Valuation

The valuation picture looks reasonable for BXP as the share price has pulled back recently along with the overall market. The stock trades at 17.0x 12-month forward earnings, a discount to its 5-year median of 19.5x.

Its price to book ratio of 2.4 is essentially in-line with its historical average.

The Bottom Line

With strong earnings momentum, solid growth potential, a 2.3% dividend yield and reasonable valuation, Boston Properties offers attractive total return potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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