Back to top

Image: Bigstock

Highwoods Properties' (HIW) Q1 FFO & Revenues Lag Estimates

Read MoreHide Full Article

Highwoods Properties Inc.’s (HIW - Free Report) first-quarter 2019 funds from operations (FFO) per share of 72 cents missed the Zacks Consensus Estimate of 84 cents. The figure also compares unfavorably with the year-ago reported tally of 85 cents.

Results were negatively impacted by the sudden closure of the company’s tenant Laser Spine Institute. This had 12 cents per share impact on FFO in the reported quarter. Further, the company recorded lower-than-expected top-line growth.

Particularly, rental and other revenues of $172.4 million in the quarter lagged the Zacks Consensus Estimate of $181.5 million. Further, the reported figure compares unfavorably with the year-earlier quarter’s reported tally of $180.4 million.

Quarter in Detail

Highwoods leased 723,000 square feet of second-generation office space during the first quarter. Rents were up 17.5% on a GAAP basis and 4.3% on a cash-basis.

Same-property cash net operating income (NOI) inched up 0.1% year over year. However, excluding the effect from Laser Spine, same-property cash NOI managed to be up 1.6% year over year. The company ended the quarter with occupancy of 91.2%. This included a 60 basis points impact from Laser Spine.

At the end of the first quarter, Highwoods’ development pipeline totaled $635 million and was 93.3% pre-leased. During the quarter, the company placed two office properties in service, involving estimated investment of $56 million in aggregate. These properties were 99.3% occupied.

As of Mar 31, 2019, Highwoods had around $4.8 million of cash and cash-equivalents compared with $3.8 million reported as of Dec 31, 2018. The company did not issue any shares under the ATM program.

2019 Outlook

Highwoods has revised its 2019 FFO per share guidance to $3.29-$3.39, indicating a decline of 16 cents at the mid-point from its initial outlook. The Zacks Consensus Estimate for the same is currently pinned at $3.45.

The company mentioned that the full effect of Laser Spine’s closure on the ongoing year’s FFO is anticipated to be 17 cents per share in total. Management noted that the dilutive impact from the sale of MetroCenter in Orlando subsequent to the end of the first quarter is projected to be a cent per share.

Our Viewpoint

Highwood’s performance was affected by the sudden closure of Laser Spine. Also, the company witnessed a year-over-year decline in rental income during the Mar-end quarter. However, the company’s continued focus on development pipeline will likely be conducive to long-term growth.

Highwoods Properties, Inc. Price, Consensus and EPS Surprise
 

Highwoods Properties, Inc. Price, Consensus and EPS Surprise | Highwoods Properties, Inc. Quote

Highwoods currently carries a Zacks Rank #4 (Sell).

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

We now look forward to the earnings releases of other REITs like Outfront Media (OUT - Free Report) , Vornado Realty Trust (VNO - Free Report) and UDR Inc. (UDR - Free Report) .

Vornado Realty Trust will release its quarterly figures on Apr 29, UDR on Apr 30 and Outfront Media is scheduled to release the same on May 7.

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.

Will you retire a millionaire?

One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”

Click to get it free >>

Published in