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What's in the Cards for Boston Properties' (BXP) Q3 Earnings?

Boston Properties, Inc. BXP is scheduled to report third-quarter 2020 results on Oct 27, after market close. The company’s results are expected to reflect year-over-year growth in funds from operations (FFO) per share, while revenues are expected to have declined.

In the last reported quarter, this office real estate investment trust’s (REIT) FFO per share of $1.52 missed the Zacks Consensus Estimate by 12.6%. Results were affected by lower-than-projected revenues.

Over the preceding four quarters, the company beat the FFO per share estimates on three occasions and missed in the other, the average negative surprise being 2.2%. This is depicted in the graph below:

Boston Properties, Inc. Price and EPS Surprise

 

Boston Properties, Inc. Price and EPS Surprise
Boston Properties, Inc. Price and EPS Surprise

Boston Properties, Inc. price-eps-surprise | Boston Properties, Inc. Quote

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

The office real estate market continued to face the impacts of the coronavirus pandemic in the third quarter, with office-using employment (a key demand driver for the office real estate sector) plunging, while new supply increased as construction projects have started to be delivered.

According to a Cushman & Wakefield report, net absorption for the quarter was negative 41.3 million square feet, following a negative net absorption of 23 million square feet in the second quarter. Moreover, the decline in demand for office real estate affected occupancy rates.

In fact, the national vacancy rate reached 14.4% during the September-end quarter, increasing 170 basis points year over year. Moreover, it marked the highest level since third-quarter 2014.

Nonetheless, asking rents for the quarter continued to increase despite an increase in vacancies. In fact, asking rents sequentially increased 1.9% to $34.64 per square foot during the third quarter.

While this lackluster environment is expected to have hindered Boston Properties’ office portfolio performance, the company’s strong credit-profiled tenant base is anticipated to have enabled it to collect the majority of its third-quarter office rents. This is encouraging for the top line as 96% of its lease revenues came from office rents, as of Jun 30, 2020.

Yet, the performance of the company’s residential properties and hotel operations at Boston Marriott Cambridge is expected to have continued to be dismal due to the pandemic. In fact, the company shut down its hotel property in March this year. The Zacks Consensus Estimate for third-quarter 2020 revenues from hotel is pinned at 0.07 million. This indicates a steep decline from the prior year’s reported figure of $13.01 million.

Moreover, the company is expected to have seen a decline in rental rates and occupancy at its residential properties. This too is expected to have marred rental revenues.

Overall, the Zacks Consensus Estimate for third-quarter revenues is pinned at $661.5 million, indicating a year-over-year decline of 4.4%.

Prior to the third-quarter earnings release, there is a lack of any solid catalyst for becoming optimistic about the company’s business activities and prospects. The Zacks Consensus Estimate for the second-quarter FFO per share has remained unrevised at $1.65 over the past month. Nevertheless, the figure suggests a year-over-year increase of 0.6%.

Earnings Whispers

Our proven model doesn’t conclusively predict a surprise in terms of FFO per share for Boston Properties this time around. The combination of a positive Earnings ESP and Zacks Rank #3 (Hold) or better increases the odds of a FFO beat. But that’s not the case here.

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

Earnings ESP: Boston Properties has an Earnings ESP of 0.00%.

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

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

Lexington Realty Trust LXP, set to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.33% and a Zacks Rank of 2 (Buy).

National Storage Affiliates Trust NSA, slated to release third-quarter earnings on Nov 5, has an Earnings ESP of +2.44% and a Zacks Rank of 3 at present.

Ventas, Inc. VTR, slated to release third-quarter earnings on Nov 6, has an Earnings ESP of +2.78% and a Zacks Rank of 3 at present.

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.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>


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Boston Properties, Inc. (BXP) : Free Stock Analysis Report
 
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