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Boston Properties (BXP) to Post Q3 Earnings: A Beat in Store?

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Boston Properties, Inc. (BXP - Free Report) is scheduled to report third-quarter 2018 results on Oct 30, after the market closes.The company’s results will likely reflect year-over-year growth in funds from operations (FFO) per share and a decline in revenues.

In the last reported quarter, this office real estate investment trust’s (REIT) FFO of $1.58 per share surpassed the Zacks Consensus Estimate of $1.56. Results reflected decent growth in development and management service revenues.

Over the preceding four quarters, the company missed the FFO per share estimates in two occasions, beat in the other and missed in another, resulting in an average negative surprise of 0.16%. 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.

Factors to Influence Q3 Results

With economic improvement and recovery in the job market, we expect healthy growth in demand for office spaces. This is because, as the economy revives, business grows and therefore, corporate sectors seek expansion, renting more space to accommodate the increased workforce.

In fact, per data from CBRE Group (CBRE - Free Report) , overallvacancy rates for U.S. office space in the Jul-Sep quarter fell to its lowest level since fourth-quarter 2007. Particularly, vacancy rates contracted 10 basis points (bps) to 12.8% in Q3. Further, while construction completions were in check, gross asking rent accelerated 1.9% year over year and 1.2% sequentially.

This favorable environment is expected to have boosted Boston Properties performance’ in the quarter under review. The company has likely enjoyed decent leasing activity in the Sep-end quarter. In fact, in July, the company signed a new lease with Verizon, for 440,000 square feet of space, at its mixed-used property —The Hub.

In fact, the Zacks Consensus Estimate for the base rent of $526 million reflects marginal growth of 2% from the prior-quarter figure. Also, the Zacks Consensus Estimate for total rental revenues for the quarter is pinned at $650 million, reflecting a projected increase of 1.7% sequentially.

Also, in September, Boston Properties announced common stock dividends of 95 cents, indicating a 18.75% sequential hike. The company’s strategy of disposing non-core assets has likely provided it with considerable dry power to reward shareholders through increased dividend payments.

While the company anticipates third-quarter 2018 FFO per share of $1.61-$1.63, the Zacks Consensus Estimate for the same is currently pegged at $1.63, indicating growth of 3.8% from the year-ago quarter. Also, over the last 30 days, this figure has remained unchanged.

Earnings Whispers

Here is what our quantitative model predicts:

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 an earnings beat.

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

Earnings ESP: Boston Properties’ Earnings ESP is +0.17%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat in terms of FFO per share. This, when combined with a favorable Zacks rank, makes us reasonably confident of a positive surprise.

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 these have the right combination of elements to report a positive surprise this quarter:

Iron Mountain Incorporated (IRM - Free Report) , scheduled to release earnings on Oct 25, has an Earnings ESP of +0.62% and a Zacks Rank #3.You can see the complete list of today’s Zacks #1 Rank stocks here.

Welltower Inc. (WELL - Free Report) , slated to report Sep-end quarter results on Oct 30, has an Earnings ESP of +1.06% and a Zacks Rank of 3.

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

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