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Highwoods Properties (HIW) Down 0.5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Highwoods Properties (HIW - Free Report) . Shares have lost about 0.5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Highwoods Properties due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Highwoods Properties' Q1 FFO & Revenues Lag Estimates

Highwoods first-quarter 2019 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 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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Highwoods Properties has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Highwoods Properties has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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