What's In Store For Boston Properties (BXP) In Q4 Earnings?

Boston Properties, Inc. (NYSE:BXP) is scheduled to report fourth quarter and 2017 results on Jan 30, after the market closes.

Last quarter, this REIT, which mainly owns and develops Class A office real estates in the United States, delivered better-than-expected performance in terms of funds from operations (FFO) per share, witnessing a positive surprise of 1.95%. Results indicated an improvement in portfolio operations, and development and management services revenues.

Further, Boston Properties has a decent surprise history. The company exceeded estimates in three of the trailing four quarters, resulting in an average positive surprise of 1.6%. This is depicted in the chart below:

Boston Properties, Inc. Price and EPS Surprise

Notably, Boston Properties’ fundamental strength has helped its shares gain 3.1% in the past six months, outperforming the 2.1% decline of the industry.

Will the stock’s rally continue post fourth-quarter earnings release? Let’s see how things are shaping up.

Earnings Whispers

Our proven model cannot conclusively predict if Boston Properties will beat the Zacks Consensus Estimate this time. That’s because, it doesn’t have the right combination of two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase 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.

Zacks ESP: The company has an Earnings ESP of -1.77%.

Zacks Rank: Boston Properties carries a Zacks Rank #3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.

Factors That Might Influence Q4 Results

Boston Properties, based out of Massachusetts, concentrates on a few select high-rent, high barrier-to-entry geographic markets. The company’s solid tenant and industry base, including several bellwethers, ensure steady rental revenue growth. Over the past five years, it recorded annual revenue growth rate of 8.17%. This trend is likely to have continued in the fourth quarter as well.

Per a recent study by CBRE Group Inc. (NYSE:CBG), the U.S. office vacancy rate increased 10 basis points (bps) in the to-be-reported quarter. The elevation is due to the rise in supply and a minor loosening of the market. However, in most of the U.S. office markets, vacancy rates declined, taking the national office vacancy rate close to its post-recession low.

In fact, with economic improvement and recovery in the job market, healthy growth in demand for office spaces is likely to have continued in the company’s markets in the quarter under review. Particularly, growth in demand for office space is anticipated to have been fueled by technology and life sciences businesses in the to-be-reported quarter.

Amid these, the Zacks Consensus Estimate for fourth-quarter revenues is pegged at $638.3 million, indicating estimated growth of 0.4% year over year. The Zacks Consensus Estimate for base rent of $515 million reflects marginal growth from the prior-quarter figure.

However, the consensus estimate for development and management services is projected to be $8.24 million, down 23.8% sequentially.

Over the past 30 days, the Zacks Consensus Estimate for FFO per share for the fourth quarter decreased 2.6% to $1.49, reflecting analysts’ bearish sentiments. Also, it reflects a year-over-year decline of 3.3%. The company projects fourth-quarter FFO per share to be in the range of $1.53-$1.54.

For full-year 2017, the Zacks Consensus Estimate for revenues came in at $2.55 billion, whereas, the consensus estimate for FFO per share came in at $6.23, reflecting a year-over-year improvement of 3.3%. Further, the management expects full-year 2017 FFO per share to be in the range of $6.24-$6.25.

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

Alexandria Real Estate Equities (NYSE:ARE) , scheduled to release earnings on Jan 29, has an Earnings ESP of +0.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CubeSmart (NYSE:CUBE) , slated to release fourth-quarter results on Feb 15, has an Earnings ESP of +1.10% and a Zacks Rank #3.

Diamondrock Hospitality Company (NYSE:DRH) , scheduled to report quarterly numbers on Feb 28, has an Earnings ESP of +4.76% and a Zacks Rank #3.

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.

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