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Boston Properties (BXP) Q1 Earnings: Is a Beat in Store?

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Boston Properties, Inc. (BXP - Free Report) is slated to report first-quarter 2017 results on Apr 25, after the market closes.

Last quarter, the company delivered a positive surprise of 2.67%. Results were backed by solid growth in revenues.

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 1.66% over the trailing four quarters. In fact, the stock beat estimates in three out of four occasions. This is depicted in the graph below.

Boston Properties, Inc. Price and EPS Surprise

Boston Properties, Inc. Price and EPS Surprise | Boston Properties, Inc. Quote

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

Why a Likely Positive Surprise?

Our proven model shows that Boston Properties is likely to beat on estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to beat estimates, and Boston Properties has the right mix.

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

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of $1.51 and the Zacks Consensus Estimate of $1.50, is +0.67%. This is a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Boston Properties’ Zacks Rank #3, when combined with a positive ESP, makes us reasonably confident of a positive surprise this season.

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

What's Driving the Better-than-Expected Earnings?

Boston Properties’ assets are primarily concentrated in select high-rent, high barrier-to-entry geographic markets. The company’s strong tenant and industry base, including several bellwethers, ensure steady rental revenue growth. Over the past five years, the company recorded annual revenue growth rate of 8.17%. This trend is likely to have continued in the first quarter as well.

In fact, with economic improvement and recovery in the job market, healthy growth in demand for office spaces is likely to have continued in the company’s markets. Particularly, growth in demand for office space is expected to have been fueled by technology and life sciences businesses in the to-be-reported quarter.

The company expects first-quarter funds from operations (“FFO”) per share in the range of $1.47–$1.49.

Moreover, over the past six months, shares of Boston Properties outperformed the Zacks categorized REIT and Equity Trust – Other industry. The shares logged in a return of 6.7%, as against 4.7% growth recorded by the industry.

However, growth in supply of office space in the market remains a concern because higher supply usually leads to lesser absorption and also curtails the landlord’s capability to demand more rents. There is also a trend of increased concessions in some of the markets.

Amid these, the Zacks Consensus Estimate for first-quarter FFO per share is currently pegged at $1.50. The estimate remained unchanged over the last 30 days.

Stocks That Warrant a Look

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:

Piedmont Office Realty Trust, Inc. (PDM - Free Report) , slated to release first-quarter results on May 2, has an Earnings ESP of +2.33% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

HCP Inc. (HCP - Free Report) , scheduled to release earnings on May 2, has an Earnings ESP of +2.08% and a Zacks Rank #3.

EPR Properties (EPR - Free Report) , slated to release earnings on May 2, has an Earnings ESP of +0.84% and a Zacks Rank #3.

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. 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.

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