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Analyst Blog

On Jun 12, 2014, we issued an updated research report on real estate investment trust (REIT), Boston Properties, Inc. (BXP - Analyst Report).

On Apr 29, Boston Properties reported first-quarter 2014 FFO (funds from operations) per share of $1.20, which missed the Zacks Consensus Estimate by 3 cents and fell short of the company’s guidance range of $1.21–$1.23 per share. This was due to the rise in utilities and snow removal expenditures incurred for its Northeast assets as well as the timing difference in its G&A expense.  

However, FFO per share was ahead of the prior-year quarter figure of $1.06 and total revenue during the quarter advanced 20.3% year over year to $574.7 million and was well ahead of the Zacks Consensus Estimate of $553 million. The quarterly hike was primarily attributable to a significant surge in rental revenues. The year-over-year increase was mainly driven by an uptick in base rents and higher tenant recoveries revenues.

Improved core operating fundamentals, the ongoing successful portfolio repositioning activities and a decent balance sheet place Boston Properties on the growth trajectory. Despite short-term headwinds, the company’s key market, Boston, is still among the most prominent office markets in the U.S. This market is growing and offers sufficient scope to the company to enhance its top line.

However, conditions in the Washington, D.C. office market remain choppy. Moreover, overall, though the office market is recovering in the U.S., the rate of revival is tepid.    

Echoing similar sentiments we note that over the last 30 days, the Zacks Consensus Estimate for FFO per share remained constant at $5.28 for 2014. However, for 2015, it moved down 0.7% to $5.71 per share. The stock now has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Investors interested in the residential REIT industry may consider stocks like The GEO Group, Inc. (GEO - Snapshot Report), Terreno Realty Corp. (TRNO - Snapshot Report) and Chatham Lodging Trust (CLDT - Snapshot Report). All these stocks carries a Zacks Rank #1 (Strong Buy).

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