Earnings Scorecard: Boston Properties

Boston Properties Inc. (BXP - Analyst Report), a leading real estate investment trust (REIT), reported fiscal 2012 first quarter funds from operations (FFO) of $1.12 per share, which marginally missed the Zacks Consensus Estimate by a penny. Funds from operations, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation and amortization and other non-cash expenses to net income.

We cover below the results of the recent earnings announcement, as well as the subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.

Earnings Report Review

Boston Properties reported first quarter 2012 FFO of $166.9 million or $1.12 per share, compared with $160.0 million or $1.12 per share in the year-earlier quarter. Total revenues during the quarter were $447.7 million, compared with $417.2 million in the year-ago quarter.

The quarterly revenues were well above the Zacks Consensus Estimate of $428 million. The overall portfolio was 92.1% leased at quarter-end.

(Read our full coverage on this earnings report: Boston Properties Misses by a Whisker)

Earnings Estimate Revisions - Overview

Fiscal earnings estimates have moved up for Boston Properties since the earnings release, meaning that analysts are bullish about the long-term performance of the company.

Agreement of Estimate Revisions

In the last 7 days, fiscal 2012 earnings estimates were raised by 4 analysts out of 11 covering the stock, while none have lowered their estimates. For fiscal 2012, 4 out of 17 analysts covering the stock have revised their estimates upward during the same time period, while none have lowered it. This indicates that the fiscal earnings estimates are skewed in the positive direction.

Magnitude of Estimate Revisions

Earnings estimates for fiscal 2012 have surged by 5 cents in the last 7 days to $4.84. For full year 2012, Boston Properties expects FFO in the range of $4.83–$4.93.

For fiscal 2013, earnings estimates have increased by 2 cents to $5.20, which signifies that the market fundamentals of the geographic areas that are being specifically focused by the company are gradually improving. Management further remained upbeat, albeit moderately, given the current volatility in the macroeconomic environment, to record relatively strong results in the coming quarters.

Moving Forward

The long-term earnings estimate picture for Boston Properties is neutral. Boston Properties concentrates on a few select high-rent, high barrier-to-entry geographic markets which usually fare better in a faltering economy. Two of the largest markets of the company, New York and Washington DC are still among the best of the office markets in the U.S.

Furthermore, about 77.6% of the net operating income of the company was generated from the Central Business Districts during first quarter 2012, which is anticipated to drive above-average organic growth over time.

However, Boston Properties has a large development pipeline which increases operational risks in the current credit-constrained market, exposing it to rising construction costs, entitlement delays, and lease-up risk.

Currently, we maintain our long-term Neutral rating on Boston Properties, which presently has a Zacks #2 Rank that translates into a short-term Buy recommendation. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold rating) for Vornado Realty Trust (VNO - Analyst Report), a competitor of Boston Properties.

About Earnings Estimate Scorecard

As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/