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BXP Gears Up to Report Q2 Earnings: Key Factors to Consider
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BXP, Inc. (BXP - Free Report) is slated to report second-quarter 2024 results on Jul 30, after market close. While its quarterly results are likely to reflect year-over-year growth in revenues, funds from operations (FFO) per share may decline.
In the last reported quarter, this office real-estate investment trust (REIT) met the Zacks Consensus Estimate in terms of FFO per share. The quarterly results reflected better-than-anticipated revenues on healthy leasing activity. However, high interest expenses during the quarter acted as a dampener.
Over the preceding four quarters, BXP’s FFO per share surpassed the Zacks Consensus Estimate on three occasions and met on one occasion, the average beat being 1.11%. This is depicted in the graph below:
Per a Cushman & Wakefield (CWK - Free Report) report, although the U.S. economy is now slowing, job growth remains healthy. CWK expects office-using job growth to be moderate for the remainder of the year before picking up in 2025.
National absorption of negative 18.2 million square feet (msf) for the second quarter improved from the negative 25.5 msf recorded in the previous quarter, bringing the four-quarter rolling total to a negative 69.6 msf. The second quarter of 2024 marked the 10th straight quarter for office demand being negative.
The Cushman & Wakefield report highlights that despite the weaker trends at the national level, demand for office spaces outperforms in some markets. In the first half of 2024, 28 markets reported positive absorption.
In addition, occupiers’ growing preference for high-quality office properties has played a key role in leading to positive absorption rates in these markets.
Nonetheless, the second-quarter national vacancy rate reached a record high of 20.5%, increasing 55 basis points (bps) sequentially and 180 bps year over year. The national asking rent increased to $37.91 in the second quarter from $37.78 in the previous quarter.
Projections
BXP owns a portfolio of class A office buildings concentrated in a few select high-rent, high-barrier-to-entry geographic markets of Boston, Los Angeles, New York, San Francisco, Seattle and Washington, DC. Given the rise in demand for top-tier assets, the company’s properties are likely to have witnessed healthy leasing activity.
There is a solid demand for life-science assets. Against this backdrop, the demand for BXP’s life-science assets is anticipated to have fared well during the second quarter. The company is converting numerous straight office buildings to laboratory/life science spaces in its suburban portfolio, especially its Kendall Center project, which is one of the leading preferred locations for life science clients in the world. Such efforts are likely to have given it an edge.
Long-term lease agreements with a diverse tenant base across industries having a solid credit profile are expected to have led to stable revenue generation during the to-be-reported quarter, boosting the top line.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $781.3 million, suggesting growth of 2.6% from the prior-year quarter’s reported number.
The consensus estimate for quarterly parking and other revenues is pegged at $30.4 million, up from $27.0 million reported in the year-ago period.
A healthy balance sheet position is likely to have supported its development activities in the quarter.
However, the elevated supply of office properties in some markets where the company operates is anticipated to have cast a pall on its quarterly performance to a certain extent. This is likely to have partly limited BXP’s ability to retain tenants at relatively higher rents and/or backfill tenant move-outs and vacancies.
Further, high interest rates are expected to have been a spoilsport. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. Our estimate suggests a year-over-year rise of 4.6% in BXP’s second-quarter interest expenses.
BXP’s activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised a cent downward to $1.72 over the past month, indicating a 7.5% decrease from the year-ago quarter’s tally.
What Our Quantitative Model Predicts
Our proven model doesn’t conclusively predict a surprise in terms of FFO per share for BXP this quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
BXP has an Earnings ESP of +0.62% and currently carries a Zacks Rank of 4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Welltower (WELL - Free Report) and American Tower (AMT - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
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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BXP Gears Up to Report Q2 Earnings: Key Factors to Consider
BXP, Inc. (BXP - Free Report) is slated to report second-quarter 2024 results on Jul 30, after market close. While its quarterly results are likely to reflect year-over-year growth in revenues, funds from operations (FFO) per share may decline.
In the last reported quarter, this office real-estate investment trust (REIT) met the Zacks Consensus Estimate in terms of FFO per share. The quarterly results reflected better-than-anticipated revenues on healthy leasing activity. However, high interest expenses during the quarter acted as a dampener.
Over the preceding four quarters, BXP’s FFO per share surpassed the Zacks Consensus Estimate on three occasions and met on one occasion, the average beat being 1.11%. This is depicted in the graph below:
BXP, Inc. Price and EPS Surprise
BXP, Inc. price-eps-surprise | BXP, Inc. Quote
U.S. Office Market
Per a Cushman & Wakefield (CWK - Free Report) report, although the U.S. economy is now slowing, job growth remains healthy. CWK expects office-using job growth to be moderate for the remainder of the year before picking up in 2025.
National absorption of negative 18.2 million square feet (msf) for the second quarter improved from the negative 25.5 msf recorded in the previous quarter, bringing the four-quarter rolling total to a negative 69.6 msf. The second quarter of 2024 marked the 10th straight quarter for office demand being negative.
The Cushman & Wakefield report highlights that despite the weaker trends at the national level, demand for office spaces outperforms in some markets. In the first half of 2024, 28 markets reported positive absorption.
In addition, occupiers’ growing preference for high-quality office properties has played a key role in leading to positive absorption rates in these markets.
Nonetheless, the second-quarter national vacancy rate reached a record high of 20.5%, increasing 55 basis points (bps) sequentially and 180 bps year over year. The national asking rent increased to $37.91 in the second quarter from $37.78 in the previous quarter.
Projections
BXP owns a portfolio of class A office buildings concentrated in a few select high-rent, high-barrier-to-entry geographic markets of Boston, Los Angeles, New York, San Francisco, Seattle and Washington, DC. Given the rise in demand for top-tier assets, the company’s properties are likely to have witnessed healthy leasing activity.
There is a solid demand for life-science assets. Against this backdrop, the demand for BXP’s life-science assets is anticipated to have fared well during the second quarter. The company is converting numerous straight office buildings to laboratory/life science spaces in its suburban portfolio, especially its Kendall Center project, which is one of the leading preferred locations for life science clients in the world. Such efforts are likely to have given it an edge.
Long-term lease agreements with a diverse tenant base across industries having a solid credit profile are expected to have led to stable revenue generation during the to-be-reported quarter, boosting the top line.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $781.3 million, suggesting growth of 2.6% from the prior-year quarter’s reported number.
The consensus estimate for quarterly parking and other revenues is pegged at $30.4 million, up from $27.0 million reported in the year-ago period.
A healthy balance sheet position is likely to have supported its development activities in the quarter.
However, the elevated supply of office properties in some markets where the company operates is anticipated to have cast a pall on its quarterly performance to a certain extent. This is likely to have partly limited BXP’s ability to retain tenants at relatively higher rents and/or backfill tenant move-outs and vacancies.
Further, high interest rates are expected to have been a spoilsport. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. Our estimate suggests a year-over-year rise of 4.6% in BXP’s second-quarter interest expenses.
BXP’s activities in the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised a cent downward to $1.72 over the past month, indicating a 7.5% decrease from the year-ago quarter’s tally.
What Our Quantitative Model Predicts
Our proven model doesn’t conclusively predict a surprise in terms of FFO per share for BXP this quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
BXP has an Earnings ESP of +0.62% and currently carries a Zacks Rank of 4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Welltower (WELL - Free Report) and American Tower (AMT - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Welltower, scheduled to report quarterly numbers on Jul 29, has an Earnings ESP of +0.67% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Tower is slated to report quarterly numbers on Jul 30. AMT has an Earnings ESP of +0.71% and carries a Zacks Rank of 2 presently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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.