Boston Properties Inc. (BXP), a real estate investment trust (REIT), is scheduled to report its fiscal 2010 second quarter earnings on July 27, 2010. The current Zacks Consensus Estimate for the second quarter is $1.00 per share, representing a year-over-year decline of 24.5%.
First Quarter Recap
Boston Properties reported its first quarter 2010 FFO (funds from operations) of $1.07 per share, beating the Zacks Consensus Estimate by 3 cents. ‘Funds from operations’ is a widely used metric to gauge the performance of REITs and is obtained after adding depreciation and amortization and other non-cash expenses to net income. The second quarter 2009 FFO was $1.11 per share.
During the quarter, the overall portfolio was 92.9% leased. Boston Properties reclassified three in-service properties spanning 131,000 square feet of space as redevelopments during the quarter. The company also refinanced a $207 million mortgage loan collateralized by a joint-venture property in which it had a 60% ownership.
Boston Properties anticipates FFO for the full year 2010 in the range of $4.06 to $4.16 per share, while FFO for the second quarter is expected to be in the range of 97 cents to 99 cents per share.
Agreement of Analysts
In the last 7 days, there were no earnings estimate revisions for either second quarter or fiscal 2010 as analysts in general were neutral in their outlook for the company. In the last 30 days, none of the 18 analysts covering the stock have revised their earnings estimates for the second quarter. For fiscal 2010, only 1 out of 20 analysts covering the stock has reduced the earnings estimate in the last 30 days, while 1 has increased the same. This signifies that there is no clear directional movement for earnings estimates.
Magnitude of Estimate Revisions
Earnings estimates have remained stagnant for the last 30 days for the second quarter and full fiscal 2010 at $1.00 and $4.12 per share, respectively, meaning that analysts were cautious about the performance of the company.
We currently have a Neutral recommendation on Boston Properties with a Zacks #3 Rank, which translates into a short-term Hold rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1−3 months.
Boston Properties owns and develops one of the largest Class-A office, industrial, and hotel properties in the U.S. The company also has a healthy balance sheet and adequate liquidity to tide over the challenging macroeconomic environment.
However, fundamentals are declining in many of the company’s office markets as corporate expansion continues to slow. In addition, Boston Properties has a large development pipeline which increases operational risks in the current credit-constrained market, exposing it to rising construction costs, entitlement delays, and lease-up risk.