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Boston Properties (BXP) Q2 FFO and Revenues Beat Estimates

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Boston Properties Inc.’s (BXP - Free Report) second-quarter 2017 funds from operations (“FFO”) per share of $1.67 surpassed the Zacks Consensus Estimate of $1.62. The figure also came in higher than the year-ago quarter tally of $1.43.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
In addition, quarterly FFO per share exceeded the company’s previously guided range of $1.61–$1.63. Results indicated an improvement in portfolio revenues, and development and management services revenues. Deferring certain expenses from this quarter to the second half of the year also benefited the results.

Total revenue during the quarter increased 5.4% year over year to $657 million. The figure also comfortably surpassed the Zacks Consensus Estimate of $630.93 million. The increase was primarily supported by higher rental revenues. Rental revenues were up 5.1% year over year to $636.2 million.

Boston Properties, Inc. Price, Consensus and EPS Surprise
 

Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.

Property Update

As of Jun 30, 2017, Boston Properties’ portfolio comprised 175 properties, covering a total of around 48.4 million square feet of space. This included nine under-development properties, covering an area of 4.7 million square feet.

The overall operating portfolio, including 163 properties (excluding two residential properties and hotel), was 90.8% leased as of Jun 30, 2017.

Liquidity Increases

Boston Properties exited second-quarter 2017 with cash and cash equivalents of around $492.4 million, up from $302.9 million as of Mar 31, 2017.

Outlook

Boston Properties updated its full-year 2017 FFO per share guidance to $6.20–$6.25 from $6.15–$6.23 provided earlier. The Zacks Consensus Estimate is $6.20.

The company projects its third-quarter 2017 FFO per share in the range of $1.52–$1.54. The range is below the Zacks Consensus Estimate of $1.55.    

Our Viewpoint

Boston Properties is well poised for growth, backed by properties located in select high-rent, high barrier-to-entry geographic markets, diversified tenant and industry base. Also, with economic improvement and recovery in job market, healthy growth in demand for office spaces is expected, in turn, strengthening the company’s growth opportunities.  

However, several big companies are choosing to resize their businesses and contain costs, which are leading to lower demand for office space. In addition, there is growth in supply of office space in the market and this remains a concern because higher supply usually leads to lesser absorption and curtails the landlord’s capability to demand more rents.

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

The stock has lost 3.1% year to date, underperforming 4.9% growth recorded by the industry it belongs to.



Q2 Earnings Schedule of Other REITs

We now look forward to the earnings releases of Condor Hospitality Trust, Inc. (CDOR - Free Report) , FelCor Lodging Trust Incorporated (FCH - Free Report) and Senior Housing Properties Trust (SNH - Free Report) . While Condor Hospitality Trust is scheduled to announce results on Aug 7, FelCor Lodging Trust Incorporated and Senior Housing Properties Trust are slated to report their Q2 numbers on Aug 9 and Aug 3, respectively.

Note: 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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