Boston Properties, Inc. (BXP Quick QuoteBXP - Free Report) is slated to report second-quarter 2016 results on Jul 26, after the market closes. Last quarter, the company had delivered a positive surprise of 2.52%.

In the trailing four quarters, this real estate investment trust (REIT), which mainly owns and develops Class A office real estates in the U.S., reported an average positive surprise of 2.12%. In fact, the stock beat estimates on all the four occasions. The company expects its second-quarter 2016 funds from operations (“FFO”) per share in the range of $1.36–$1.38. Currently, the Zacks Consensus Estimate for the same is pegged at $1.40.

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

BOSTON PPTYS Price and EPS Surprise

BOSTON PPTYS Price and EPS Surprise | BOSTON PPTYS Quote

Factors to Consider

With properties in select high-rent, high barrier-to-entry geographic markets, Boston Properties boasts a diversified tenant and industry base, including several bellwethers. This has helped the company record an annual compound revenue growth rate of 10.05% over the last five years.

Given Boston Properties’ improving core operations, rental revenue is expected to grow in the to-be-reported quarter. However, supply increase in some of its markets amid modest demand might result in moderate growth in rents. Nevertheless, the company is expected to make progress on its leverage level.

Per a report by CBRE Group, Inc. , vacancy rate in the U.S. office sector witnessed a decline of 10 bps to 13.0% in the quarter. With a 40-bp decline over the past year, the national office vacancy rate is at its lowest level since 2008. Global economic uncertainty has delayed decisions on new spaces for a number of tenants, though supply has been manageable.
    
During the quarter, Boston Properties’ performance was inadequate to gain analysts' confidence. As a result, the Zacks Consensus Estimate remained unchanged at $1.40 over the last seven days.
 
Earnings Whispers

Our proven model does not conclusively show that Boston Properties will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate Estimate and the Zacks Consensus Estimate currently stand at $1.40 respectively, which translate into an Earnings ESP of 0.00%.

Zacks Rank: Boston Properties’ Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP as well to be confident about an earnings surprise.

Note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Taubman Centers, Inc. has an Earnings ESP of +7.22% and a Zacks Rank #3. The company will release results on Jul 28.

Regency Centers Corp. (REG Quick QuoteREG - Free Report) has an Earnings ESP of +1.25% and a Zacks Rank #3. The company will release results on Aug 2.


Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All earnings per share numbers presented in this write up represent FFO per share.

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