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Balanced View on Boston Properties

Zacks Equity Research

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.

Read the Full Research Report on BXP
Read the Full Research Report on PSA
Read the Full Research Report on HCN
Read the Full Research Report on CUZ

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