What's in Store for Boston Properties (BXP) in Q2 Earnings?

Boston Properties, Inc.BXP is scheduled to report second-quarter 2018 results on Jul 31, after the market closes .

In the last reported quarter, this office REIT delivered an in-line performance in terms of funds from operations (FFO) per share. However, over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in two occasions, met in another and missed in the other. It delivered an average positive surprise of around 0.61% during this period.

The graph below depicts this surprise history:

Boston Properties, Inc. Price and EPS Surprise

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

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

Factors to Influence Q2 Results

Boston Properties, based in Massachusetts, concentrates on a few select high-rent and high barrier-to-entry geographic markets. The company is likely to gain from its solid tenant and industry base, including several bellwethers. Moreover, it is likely to experience solid contribution in 2018 from its non-same-property portfolio, mainly driven by development deliveries.

In addition, with economic improvement and recovery in the job market, we expect healthy growth in demand for office spaces. This is because, as the economy revives, business grows and therefore, corporate sectors seek expansion, renting more space to accommodate the increased workforce.

Going by numbers, per data from CBRE Group CBRE , in the U.S. office sector for the first time in four quarters, vacancy rate contracted 10 basis points (bps) to 13.0% in Q2. However, there is a slowdown in gross asking rent growth, with a demand-and-supply balance. Average rent inched up 0.4% sequentially and 1.3% year over year.

For Boston Properties too, there is growth in the supply of office space in its markets and this remains a concern because higher supply usually leads to lesser absorption and also curtails landlords' capability to demand more rents. There is also a trend of increased concessions in some of the markets.

Amid these, the Zacks Consensus Estimate for the base rent of $521 million reflects marginal growth from the prior-quarter figure. However, the Zacks Consensus Estimate for total revenues for the quarter is pegged at $614.4 million, reflecting a projected decline of 6.5% year over year.

While the company anticipates second-quarter 2018 FFO per share of $1.53-$1.55, the Zacks Consensus Estimate for the same is currently pegged at $1.56, indicating a decline of 6.6% from the year-ago quarter. Also, over the last 60 days, this figure has been marginally revised downward.

Earnings Whispers

Our proven model does not conclusively show that Boston Properties is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a bullish Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

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 -0.13%.

Zacks Rank: Boston Properties' Zacks Rank of 3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident about a positive surprise.

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 positive surprise this quarter:

Ventas Inc.VTR , slated to release second-quarter results on Jul 27, has an Earnings ESP of +0.82% and a Zacks Rank of 3. You can see the complete list of today's Zacks #1 Rank stocks here .

Vornado Realty TrustVNO , scheduled to release quarterly figures on Jul 30, has an Earnings ESP of +3.30% and a Zacks Rank #3.

HCP, Inc.HCP , set to report Q2 numbers on Aug 2, has an Earnings ESP of +0.66% and carries a Zacks Rank of 3.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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