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Boston Properties (BXP) to Post Q1 Earnings: What's in Store?

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Boston Properties, Inc. (BXP - Free Report) is scheduled to report first-quarter 2019 results on Apr 30, after the market closes. The company’s results will likely reflect year-over-year growth in funds from operations (FFO) per share and revenues.

In the last reported quarter, this office real estate investment trust’s (REIT) FFO of $1.59 per share improved 7% year over year. Results were supported by higher occupancy and strong leasing activity.

Over the preceding four quarters, the company surpassed the FFO per share estimates on two occasions, met in another and missed in the other, the average negative surprise being 0.87%. This is depicted in the graph below:

Boston Properties, Inc. Price and EPS Surprise

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

Factors to Influence Q1 Results

Per a report by the Newmark Knight Frank, the first-quarter office vacancy rate shrunk 30 basis points (bps) year over year to 13%. Further, job creation in office-using sectors boosted new demand, resulting in 3.2% year-over-year growth in asking rents.

Specifically, San Francisco, where Boston Properties has significant presence, witnessed strongest net absorption in first-quarter 2019, driven by office demand in the tech industry.

These encouraging figures suggest a decent economy and steady growth in the job market which is creating a favorable environment for office properties. In fact, as the economy revives, existing business grows and therefore, corporate sectors seek expansion, renting more space to accommodate the increased workforce.

Also, amid healthy growth in demand for office spaces, office landlords can raise rents for properties.
In fact, the company’s base rent is expected to improve 5.4% year over year to $548 million in the March-end quarter.

Significant leasing activity and growth in rental revenues will likely drive the company’s performance. In fact, in January, Boston Properties signed two long-term leases, aggregating 250,000 square feet at the company’s 399 Park Avenue property, located in midtown New York City.

Amid this, the Zacks Consensus Estimate for total rental revenues for the quarter is pegged at $681 million and indicates a marginal sequential growth.

Although Boston Properties’ office portfolio will likely report decent results, performance of the company’s hotel property will be a spoilsport in the first quarter. Specifically, quarterly revenues for its hotel property are pegged at $9.29 million, down from the prior-quarter reported figure of $11.7 million.

Additionally, escalating construction costs and a significant development pipeline might inflate the company’s expenses, thereby hurting bottom-line growth. 

While the company anticipates first-quarter 2019 FFO per share of $1.68-$1.70, the Zacks Consensus Estimate for the same is currently pegged at the lower end of the range, indicating 11.4% growth from the year-ago quarter reported tally. However, given the lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects, the estimate remained unchanged over the past month.

Earnings Whispers

Our proven model does not conclusively show that Boston Properties is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here, as you will see below.

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

Earning ESP: Boston Properties’ Earnings ESP is -0.20%.

Zacks Rank: The company currently carries a Zacks Rank of 2, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Alexandria Real Estate Equities, Inc. (ARE - Free Report) , scheduled to release earnings on Apr 29, has an Earnings ESP of +0.3% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mack-Cali Realty Corporation (CLI - Free Report) , slated to report first-quarter results on May 1, has an Earnings ESP of +1.2% and holds a Zacks Rank of 3.

Welltower, Inc. (WELL - Free Report) , scheduled to release earnings on Apr 30, has an Earnings ESP of +0.09% and carries 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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