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What's in Store for Boston Properties (BXP) This Earnings Season?

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Boston Properties, Inc. (BXP - Free Report) is slated to report second-quarter 2021 results on Jul 27, after market close. The company’s results will likely reflect year-over-year growth in both quarterly funds from operations (FFO) per share and revenues.

In the last reported quarter, the office real estate investment trust (REIT) delivered a surprise of 0.65% in terms of FFO per share. Results highlighted better-than-projected portfolio performance and higher fee income.

Over the preceding four quarters, Boston Properties surpassed the FFO per share estimate on one occasion and missed in the other three, the average negative surprise being 7.7%. This is depicted in the graph below:

Boston Properties, Inc. Price and EPS Surprise

Boston Properties, Inc. Price and EPS Surprise

Boston Properties, Inc. price-eps-surprise | Boston Properties, Inc. Quote

Let’s see how things have shaped up for this announcement.

With relaxations of pandemic-related restrictions and vaccine roll-outs, there has been return of the workforce to offices and other places of businesses. These make us optimistic about the company’s second-quarter results.

The REIT has seen an uptick in leasing activity during the second quarter, and signed long-term leases with media, technology and consulting companies. The company announced signing a 72,000-square-foot, 10-year new lease with Roku Inc. at Colorado Center in Santa Monica, CA, and a long-term lease for 98,000 square feet of space at Metropolitan Square in Washington, DC.

Boston Properties also inked a seven-year lease with a leading entertainment company for 351,000 square feet of space and a 140,000-square-foot expansion lease at Santa Monica Business Park in Santa Monica, CA.

Apart from these, the company acquired two lab properties, 153 & 211 Second Avenue in Waltham, from an affiliate of Montana Avenue Capital Partners, LLC for $100 million in cash.

Amid the global efforts to develop life-saving vaccines and therapeutics for coronavirus, the drug research and innovation business continued to witness a robust demand during second-quarter 2021. Favorable drug approval trends and high life-science funding have been positives. Amid these, Boston Properties is anticipated to have witnessed a decent demand, occupancy and tenant retention at its lab properties.

The Zacks Consensus Estimate for second-quarter revenues is pegged at $674.4 million, indicating year-over-year growth of 7%. Moreover, the consensus estimate for quarterly parking and other revenues is pegged at $17.01 million, indicating a 22% rise from the year-ago period.

However, the pandemic’s impact on the labor markets continued to overwhelm the U.S. office real estate market during the quarter to be reported, resulting in negative net absorption and an increase in vacancy levels. While the U.S. economy slashed nearly three million office-using jobs last year in March and April, the United States added back only 1.7 million in 2020 and another 389,000 office-using jobs during the first half of this year. The remote-working wave is still continuing and though the office-using employment is recovering, it is still below the pre-pandemic level.

Specifically, going by a Cushman & Wakefield (CWK - Free Report) report, the U.S. office sector witnessed negative net absorption of 38.5 million square feet, marking its fifth consecutive quarter of negative absorption. Also, the vacancy rate increased to 17.2% in the June-end quarter from the prior year’s 13.5%.

Prior to the second-quarter earnings release, analysts seem to be pessimistic about the company’s prospects as the Zacks Consensus Estimate for the quarterly FFO per share remained unrevised at $1.61 over the past week. Nevertheless, it calls for a 5.9% increase from the prior-year quarter.

The company projects second-quarter 2021 FFO per share at $1.59-$1.61.

Earnings Whispers

Boston Properties has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of a FFO beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Boston Properties has an Earnings ESP of +0.29%.

Zacks Rank: It currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks That Warrant a Look

Here are other stocks from the REIT sector that you may want to consider, as our model shows that these too have the right combination of elements to report a surprise this quarter:

Duke Realty Corp. (DRE - Free Report) , slated to release second-quarter earnings on Jul 28, has an Earnings ESP of +0.47% and carries a Zacks Rank of 3, at present.

Digital Realty Trust, Inc. (DLR - Free Report) , scheduled to report quarterly numbers on Jul 29, currently has an Earnings ESP of +0.63% and carries a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.