BXP, Inc. BXP is slated to report fourth-quarter 2024 results on Jan. 28, after market close. While the company’s quarterly results are likely to display a year-over-year rise in revenues, funds from operations (FFO) per share are expected to decline.
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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, higher 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 two occasions and met on the remaining periods, the average beat being 0.87%. This is depicted in the graph below:
BXP, Inc. Price and EPS Surprise
BXP, Inc. Price and EPS Surprise
BXP, Inc. price-eps-surprise | BXP, Inc. Quote
U.S. Office Market in Q4
Per a Cushman & Wakefield report, although the overall net absorption was negative in the fourth quarter, certain markets registered improved absorption. U.S. office markets’ vacancy rate grew in the quarter, marking the lowest increase in two-and-half years. However, the national asking rent slightly decreased in the quarter.
For the fourth quarter of 2024, the U.S. office net absorption of negative 5.8 million square feet (msf) improved from the negative 13.2 msf recorded in the previous quarter, making it the most stable quarter for office demand in the past two years. This quarter marked the 12th straight quarter to report negative net absorption in the U.S. office sector.
The Cushman & Wakefield report highlights that despite the weaker trends at the national level, demand for U.S. office spaces outperformed in some markets. In the fourth quarter, 44 out of the 93 U.S. markets reported positive net absorption, while full-year absorption was positive in 29 markets. Occupiers’ growing preference for high-quality office buildings has played a key role in leading to positive net absorption rates in these markets.
High-quality offices remain more resilient and are expected to recover faster. In the fourth quarter, Class A absorption remained relatively flat in the country at negative 61,000 square feet. There was a quarter-over-quarter increase in Class A net absorption in two-thirds of U.S. markets, with half of them showing positive results.
Nonetheless, the fourth-quarter national vacancy rate reached 20.9%, increasing 20 basis points (bps) sequentially and 160 bps year over year. Vacancy was flat or declined sequentially in nearly half of U.S. Markets. The national asking rent decreased to $38.20 in the fourth quarter from $38.22 in the previous quarter.
BXP’s 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 in the fourth quarter.
We expect BXP’s in-service properties occupancy to increase 30 basis points sequentially to 87.3% in the to-be-reported quarter.
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 quarter. A healthy balance sheet position is likely to have supported its development activities in the quarter.
The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $795.3 million, suggesting an increase of 3.4% from the prior-year quarter’s reported number.
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 expenses are expected to have been a spoilsport for BXP during the to-be-reported quarter. We estimate a 2.9% year-over-year increase in interest expenses for the fourth quarter.
BXP’s activities in the to-be-reported quarter were inadequate in garnering analysts’ confidence. The Zacks Consensus Estimate for fourth-quarter FFO per share has been revised a cent downward to $1.79 in the past month. It suggests a 1.7% 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 0.00% and currently carries a Zacks Rank of 3. 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 — Vornado Realty Trust VNO and Ventas VTR — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.
Vornado Realty is slated to report quarterly numbers on Feb. 10. VNO has an Earnings ESP of +1.56% and a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ventas is slated to report quarterly numbers on Feb. 12. VTR has an Earnings ESP of +0.89% and carries 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.
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