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Highwoods (HIW) Q4 FFO Beats Estimates, Revenues Rise Y/Y

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Highwoods Properties Inc. (HIW - Free Report) reported fourth-quarter 2017 funds from operations (FFO) of 84 cents per share, beating the Zacks Consensus Estimate by a penny. It also compares favorably with the year-ago tally of 82 cents.

Results indicate growth in same-property net operating income (NOI) and strong leasing metrics.

For full-year 2017, FFO came in at $3.39 per share, up 3.4% from the 2016 figure. Also, it surpassed the full-year Zacks Consensus Estimate for FFO of $3.38 per share.

Total revenues for the quarter rose 4.9% year over year to $175.9 million. However, the top line came in below the Zacks Consensus Estimate of $177.4 million.

For full-year 2017, revenues came in at $702.7 million, up 5.6% from the year-ago figure. However, revenues marginally missed the full-year Zacks Consensus Estimate of $703.2 million.

Quarter in Detail

Highwoods leased 1 million square feet of second-generation office-space during the reported quarter. Same-property cash NOI climbed 2.2% year over year.

During the reported quarter, the company sold non-core assets worth $45 million.

The company also amended its term loan and unsecured revolving credit facility. The credit facility recast upsized Highwoods’ borrowing capacity by 125 million, extended maturity and lowered the borrowing spread by 10 basis points (bps).

As of Dec 31, 2017, Highwoods had $3.3 million of cash and cash-equivalents compared with $49.5 million as of Dec 31, 2016.

2017 Outlook

Highwoods expects 2018 FFO per share in the range $3.35-$3.47. The Zacks Consensus Estimate for 2018 is currently pegged at $3.47.

Our Viewpoint

Improving operating performance reflects brighter prospects for the company. Highwoods is making diligent efforts to expand its footprint in high-growth markets and enhance the portfolio quality through prudent asset acquisitions and disposals. Furthermore, the company’s dispositions are anticipated to have a minuscule impact on its revenues.

Its focus on high-quality office assets in best business districts (BBDs) bodes well. With the recovery of the economy and labor markets, Highwoods will likely experience healthy demand for office space.
 
Nonetheless, Highwoods faces intense competition from developers, owners and operators of office properties, as well as other commercial real estates, including sublease space available from its tenants. This restricts the company’s ability to attract and retain tenants at relatively higher rents than its competitors. Moreover, the company’s assets are concentrated in a few markets, which makes it vulnerable to the economic and political doldrums prevalent in the area.

Highwoods Properties, Inc. Price, Consensus and EPS Surprise

Highwoods currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Taubman Centers, Inc. , Regency Centers Corporation (REG - Free Report) and HCP Inc. (HCP - Free Report) . Taubman Centers and Regency Centers are scheduled to release results on Feb 8, while HCP is slated to report its numbers on Feb 13.

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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