Balanced View on Boston Properties - Analyst Blog

On Mar 12, 2014, we issued an updated research report on Boston Properties Inc. BXP, a real estate investment trust (REIT).

On Jan 28, continuing with its winning streak, Boston Properties reported fourth-quarter 2013 funds from operations (FFO) per share of $1.29, which exceeded the Zacks Consensus Estimate by 5 cents and the year-ago quarter figure by 2 cents. Also, this was ahead of the company's guidance range of $1.23–$1.25. The better-than-expected performance was driven by a rise in total revenue that climbed 20.5% year-over-year.

We believe that Boston Properties is well poised for a strong growth trajectory going forward, given its successful endeavors to maintain a dominant position in high barrier-to-entry geographic markets across the U.S. Additionally, the company has a decent balance sheet with manageable near-term debt maturities.

Apart from this, the company remains committed to boost shareholder's wealth as evident when it declared a special cash dividend of $2.25 per share during the fourth quarter. Such moves boost investors' confidence in the stock. 

However, Boston Properties has a large development pipeline, which increases its operational risks by exposing it to rising construction costs, entitlement delays and lease-up risks. Also, the company has assets in only four markets of the U.S, which subjects it to any economic downturn in these markets. Moreover, with a gradual reduction in the Fed's support, interest rates are expected to increase, which may in turn hurt the rate-sensitive business of the company in the long run.

Over the last 30 days, the Zacks Consensus Estimate has remained stable at $5.32 per share for 2014. However, it dipped by a penny to $5.76 for 2015. Consequently, the stock currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Investors interested in REIT industry may consider stocks like Cousins Properties Inc. CUZ, Health Care REIT, Inc. HCN and Public Storage PSA. All three stocks have a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.