Earnings Scorecard: Boston Properties - Analyst Blog

Boston Properties Inc. (BXP), a leading real estate investment trust (REIT), reported fiscal 2010 fourth quarter recurring funds from operations (FFO) of $1.14 per share, which well exceeded the Zacks Consensus Estimate by 6 cents. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
 
We cover below the results of the recent earnings announcement, as well as the subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.
 
Earnings Report Review
 
Total revenues of the company during the quarter were $392.5 million, compared with $376.1 million in the year-ago quarter. The quarterly revenues were well above the Zacks Consensus Estimate of $375 million. The overall portfolio was 93.2% leased at quarter-end.

For full year 2010, Boston Properties reported FFO of $547.4 million or $3.90 per share, compared with $606.3 million or $4.59 per share in the year-ago period. Recurring FFO for fiscal 2010 was $4.40 per share, which exceeded the Zacks Consensus Estimate by 5 cents. Total revenues during the year were $1.6 billion, compared with $1.5 billion in 2009. The fiscal revenues were marginally ahead of the Zacks Consensus Estimate of $1.5 billion.
 
(Read our full coverage on this earnings report: BXP Recurring FFO Beats Estimates)
 
Earnings Estimate Revisions- Overview
 
Fiscal earnings estimates have climbed up for Boston Properties since the earnings release, meaning that analysts are bullish about the long-term performance of the company. Let's dig into the earnings estimate details.
 
Agreement of Estimate Revisions
 
In the last 7 days, fiscal 2011 earnings estimates were raised by 4 analysts out of 10 covering the stock, while none have lowered the same. For fiscal 2012, 3 out of 16 analysts covering the stock have revised their estimates upward during the same time period, while none have lowered it. This indicates a clear positive directional movement for the fiscal year earnings.
 
Magnitude of Estimate Revisions
 
Earnings estimates for fiscal 2011 have increased by 9 cents in the last 7 days to $4.50. For fiscal 2012, earnings estimates have increased by 2 cents to $4.79. This is encouraging news for the company. Boston Properties expects first quarter 2011 FFO in the range of $1.06–$1.08 per share, while FFO for full year 2011 is expected in the range of $4.45–$4.60.

Moving Forward
 
The long-term earnings estimate picture for Boston Properties is positive. Boston Properties concentrates on a few select high-rent, high barrier-to-entry geographic markets which usually fare better in a faltering economy. Two of the largest markets of the company, New York and Washington DC are still among the best of the office markets in the U.S. Furthermore, about 74.9% of the net operating income of the company is generated from the Central Business Districts during fourth quarter 2010, which drive above-average organic growth over time.
 
However, 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. 
 
Currently, we maintain our long-term Neutral rating on Boston Properties, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold' recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral' recommendation and a Zacks #3 Rank for Vornado Realty Trust (VNO), a competitor of Boston Properties.

About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/

 
BOSTON PPTYS (BXP): Free Stock Analysis Report
 
VORNADO RLTY TR (VNO): Free Stock Analysis Report
 
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