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Highwoods Properties' (HIW) Q1 FFO & Revenues Beat Estimates

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Highwoods Properties Inc. HIW reported first-quarter 2018 funds from operations (FFO) of 85 cents per share, beating the Zacks Consensus Estimate of 82 cents. It also compares favorably with the year-ago tally of 80 cents.

Results indicate growth in same-property cash net operating income (NOI) and higher net effective rents for second-generation office space.

Total revenues for the quarter rose 6.2% year over year to $180 million. Moreover, the top line outpaced the Zacks Consensus Estimate of $177 million.

Quarter in Detail

Highwoods leased 857,000 square feet of second-generation office space during the first quarter. Same-property cash NOI climbed 2.9% year over year.

During the reported quarter, the company acquired two development parcels, spanning nine acres in CBD Nashville, for a total price of $50.3 million.

The company also issued 10-year notes worth $350 million at an effective interest rate of 4.06%. Notably, it did not issue any shares under the ATM program.

As of Mar 31, 2018, Highwoods had $31 million of cash and cash-equivalents compared with $3.3 million reported as of Dec 31, 2017.

2018 Outlook Raised

Highwoods expects 2018 FFO per share of $3.37-$3.47, up from the previous range of $3.35-$3.47. The Zacks Consensus Estimate for the same is currently pegged at $3.42.

Our Viewpoint

Highwoods’ improving operating performance looks encouraging. Notably, the company’s efforts to expand its footprint in high-growth markets and enhance portfolio quality through accretive buyouts drove the stellar performance.

Furthermore, its focus on high-quality office assets in best business districts (BBDs) enabled the company to achieve high rent growth and active pre-leasing of pipeline.

However, escalating operating and interest expenses remained headwinds. Further, asset concentration in a few markets exposes Highwoods to any economic or political downturn.

Highwoods Properties, Inc. Price, Consensus and EPS Surprise

Highwoods Properties, Inc. Price, Consensus and EPS Surprise | Highwoods Properties, Inc. Quote

Highwoods currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Alexandria Real Estate Equities, Inc. ARE, Regency Centers Corporation REG and Welltower Inc. WELL. Alexandria and Regency Centers are scheduled to release results on Apr 30, while WELL is slated to report its numbers on May 1.

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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