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Boston Properties Inc. (BXP - Analyst Report), a real estate investment trust (REIT), reported second quarter 2012 FFO (funds from operations) of $206.8 million or $1.37 per share, compared with $181.6 million or $1.23 per share in the year-earlier quarter. The reported FFO for the quarter beat the Zacks Consensus Estimate by 13 cents. The year-over-year increase in FFO was driven by higher rental revenue.
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
Total revenue during the quarter were $472.9 million, compared with $433.9 million in the year-ago quarter. The quarterly revenues were well above the Zacks Consensus Estimate of $425 million. The overall portfolio was 91.6% leased at quarter end.
Boston Properties ended second quarter 2012 with cash and cash equivalents of $1.7 billion.
Read our full coverage on this earnings report:Boston Properties Beats Estimates
Earnings Estimate Revisions - Overview
Fiscal earnings estimates for Boston Properties have moved in both directions and remained unchanged since the earnings release, implying that the analysts are cautious about the long-term performance of the company. Let’s dig into the earnings estimate details.
Agreement of Estimate Revisions
In the last seven days, the earnings estimates for 2012 were increased by two out of the 15 analysts covering the stock, and decreased by one during the same time period. For 2013, three out of the 17 analysts covering the stock increased their earnings estimates and two decreased the same. This indicates that the fiscal year earnings estimate revisions are a mixed bag for Boston Properties.
Magnitude of Estimate Revisions
Earnings estimate for 2012 has increased by a penny over the last seven days to $4.88 per share. For 2013, earnings estimates have remained constant at from $5.29 during the same time period, which indicates that the analysts are cautious about the future performance of the company
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 office markets in the U.S.
Boston Properties has a strong and dedicated management team, which is one of the most respected and accomplished in the industry. The company benefits from the reputation and relationships of its key personnel with the industry as a whole. This helps inculcate further profitable business and investment opportunities.
However, Boston Properties face significant competition from developers, owners and operators of office properties and other commercial real estate, including sublease space available from its tenants. This influences its ability to attract and retain tenants at relatively high rents than its competitors, and adversely affects its long-term profitability.
Boston Properties currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also maintain our long-term Neutral recommendation on the stock. One of its competitors, Vornado Realty Trust (VNO - Analyst Report) also holds a Zacks #3 Rank.
Fund from operations, 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. FFO per share in the reported quarter was in line with the Zacks Consensus Estimate.
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 celebrated stock rating systems in use today. The Zacks Rank for stock trading in a one to three 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