It has been about a month since the last earnings report for Boston Properties (BXP). Shares have lost about 12.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Boston Properties due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Boston Properties Q4 FFO & Revenues Top, Leasing Strong

Boston Properties fourth-quarter 2022 FFO per share of $1.86 outpaced the Zacks Consensus Estimate of $1.84. The figure increased 18.7% year over year. Our estimate for the same was $1.83.

The quarterly figure also exceeded the mid-point of the company’s fourth-quarter guidance by a cent, reflecting portfolio outperformance. In addition, BXP experienced solid leasing activity in the quarter. The company revised its 2023 outlook for FFO per share.

Quarterly revenues from lease came in at $739.1 million, which surpassed the consensus mark of $732.9 million. Moreover, the figure rose 6.9% from $690.9 million reported in the year-ago quarter. We projected the same to be $728 million.

In 2022, Boston Properties reported FFO per share of $7.53, which beat the Zacks Consensus Estimate of $7.51. The figure compared favorably with the prior year’s $6.56. Our estimate was $7.50. Lease revenues of $2.92 billion surpassed the Zacks Consensus Estimate of $2.91 billion and increased 6% year over year. We estimated the same to be $2.91 billion.

Quarter in detail

Boston Properties’ rental revenues (excluding termination income) for the office portfolio came in at $697.3 million, rising 2.5% year over year. The same for the hotel & residential segment aggregated $22.6 million, indicating a jump of 39.6% year over year.  

BXP’s share of same property NOI on a cash basis (excluding termination income) totaled $474.1 million, up 6.8% year over year.

Its share of EBITDAre (on a cash basis) as of Dec 31, 2022, was $440.3 million, up from $429.5 million as of Sep 30, 2022.

BXP’s in-service properties’ occupancy fell 30 basis points sequentially to 88.6%. We estimated the same to be 88.8%.

Portfolio Activity

As of Dec 31, 2022, Boston Properties’ portfolio comprised 194 properties, encompassing 54.1 million square feet of space. This included 13 properties under construction/redevelopment.

During the fourth quarter, the company executed 1.1 million square feet of leases with a weighted average lease term of 7.8 years.

BXP closed the acquisition of around 27% interest in the joint venture that owns 200 Fifth Avenue, a 14-story, 855,000 square feet, LEED Gold-certified premier workplace in the Midtown South submarket of Manhattan, NY, for roughly $280.1 million. This includes $120.1 million of cash and $160 million of BXP’s pro rata share of the outstanding loan secured by the property. At present, the property is around 93% leased.

BXP commenced the redevelopment of 105 Carnegie Center, a 70,000 square feet property in Princeton, NJ. The property will be redeveloped into a laboratory/life sciences space encompassing around 73,000 square feet.

In the quarter, the company disposed of the residential component of The Avant at Reston Town Center, a 15-story, 359-unit luxury multifamily building spanning roughly 329,000 square feet in Reston, VA, for $141 million. The transaction generated net proceeds of nearly $138 million for the company and a gain on the sale of real estate of approximately $55.6 million. BXP retained ownership of the ground-level retail space covering roughly 26,000 square feet.

Liquidity

Boston Properties exited 2022 with $690.3 million of cash and cash equivalents, up from $375.8 million as of Sep 30, 2022.

BXP’s share of net debt to EBITDAre annualized was 7.57 as of Dec 31, 2022, up from 7.49 times as of Sep 30, 2022.

Revised 2023 Outlook

Boston Properties projects FFO per share for first-quarter 2023 to be in the range of $1.66-$1.68.

For 2023, FFO per share is expected to be in the band of $7.08-$7.18, down from $7.15-$7.30 guided earlier.

BXP estimates the increase in its share of the same property NOI on a cash basis (excluding termination income) to be between 1% and 2.5% for 2023. The average in-service portfolio occupancy is expected to be in the band of 88-89.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Boston Properties has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Boston Properties has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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