Boston Properties (BXP) Q4 FFO Miss Estimates, Revenues Rise

Boston Properties Inc.’s (NYSE:BXP) fourth-quarter 2017 funds from operations (FFO) per share of $1.49 missed the Zacks Consensus Estimate of $1.53. The figure also came in lower than the year-ago quarter tally of $1.54.

In addition, quarterly FFO per share came in lower than the company’s previously guided range of $1.53-$1.54.

FFO per share for full-year 2017 came in at $6.22, missing the Zacks Consensus Estimate of $6.25. The company recorded FFO per share of $6.03 in 2016.

Total revenues during the quarter increased 3% year over year to $655.2 million. The figure also comfortably surpassed the Zacks Consensus Estimate of $641.4 million. The rise was attributable to increase in all the revenue components.

For the full year, the company recorded revenues of $2.6 billion, up 2% from the 2016 figure. Further, it surpassed the Zacks Consensus Estimate of $2.55 billion.

Property Update

As of Dec 31, 2017, Boston Properties’ portfolio comprised 179 properties, covering a total of around 50.3 million square feet of space. This included 12 under-development properties, covering an area of 6.2 million square feet.

The overall operating portfolio, including 164 properties (excluding two residential properties and hotel), was 90.7% leased as of Dec 31, 2017.

Portfolio Activity

During the fourth quarter, a Class A office space, Salesforce Tower in San Francisco, California having about 1,400,000 net rentable square feet was partially placed in-service by a consolidated entity. The company has 95% interest in it. The office space is 97% leased.

Further, Boston Properties also started the construction of a Class A office property20 CityPoint during this quarter, which covers 211,000 net rentable square feet. The property located in Waltham, Massachusetts is already 52% leased.

Liquidity Increases

Boston Properties exited the fourth quarter with cash and cash equivalents of around $434.8 million, up from $356.9 million as of Dec 31, 2016.

Outlook

Boston Properties updated its full-year 2018 FFO per share guidance to $6.23-$6.36 from $6.20-$6.36 provided earlier. The Zacks Consensus Estimate is pegged at $6.34.

The company projects its first-quarter 2018 FFO per share in the range of $1.47-$1.49. The Zacks Consensus Estimate currently stands at $1.51.

Our Viewpoint

Boston Properties is well poised for growth, with the support of 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 to strengthen the company’s growth opportunities. Further, during the quarter, the company announced a 6.7% hike in its quarterly dividend. Solid dividend payouts are arguably the biggest enticement for REIT investors.

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

Boston Properties, Inc. Price, Consensus and EPS Surprise

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

Upcoming Releases

We now look forward to the fourth-quarter earnings releases of some other companies like EPR Properties (NYSE:EPR) , Lamar Advertising Company (NASDAQ:LAMR) and Outfront Media Inc. (NYSE:OUT) . EPR Properties is scheduled to announce results on Feb 28 while Lamar Advertising Company and Outfront Media are slated to report on Feb 27.

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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