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It has been about a month since the last earnings report for Highwoods Properties (HIW). Shares have lost about 6.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Highwoods 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 its most recent earnings report in order to get a better handle on the important drivers.
Highwoods Beats on Q2 FFO, Collects 99% July Rents
Highwoods’ second-quarter 2020 FFO per share of 93 cents surpassed the Zacks Consensus Estimate of 89 cents. The figure also improved 7% from the 87 cents reported in the year-ago period.
Rental and other revenues of $183.2 million in the quarter decreased marginally year over year. Moreover, the reported figure missed the Zacks Consensus Estimate of $185 million.
With regard to its rental receipts for July and for the second quarter, management announced that it has collected 99% of the contractually-required rents, with rent deferrals granted to tenants, representing 1.2% of its annualized rental revenues.
Quarter in Detail
Highwoods leased 821,000 square feet of second-generation office space during the second quarter, including 91,000 square feet of new leases and 48,000 square feet of expansion leases. Rents were up 5.5% on a cash basis.
At the end of the second quarter, total in-service portfolio occupancy was 91.1%, improving 20 basis points sequentially.
Same-property cash NOI increased 2.4% year over year, excluding the impact of temporary rent deferral agreements.
As of Jun 30, 2020, Highwoods had $4.7 million of cash and cash-equivalents compared with $9.5 million reported as of Dec 31, 2019. The company exited the reported quarter with about $586 million availability of funds under its $600-million revolving credit facility, scheduled to mature in January 2022, and a net debt-to-adjusted EBITDAre ratio of 4.90. The company has no debt maturities in the next 12 months.
Highwoods revised the current year FFO per share guidance to $3.59-$3.68 from $3.55-$3.68 guided earlier.
The company updated the pandemic’s impact on some assumptions. It expects a decline in parking and parking-related revenues to impact 2020 FFO per share by 5-9 cents. Moreover, a decline in rental revenues for the remainder of 2020 will impact full-year FFO per share by 2-4 cents. Highwoods also expects lost rental revenues from customers experiencing financial difficulties due to bankruptcies or default as well as non-cash credit losses of straight line receivables.
Same-property cash NOI is projected to be 1-2% for 2020, while year-end occupancy is projected to be 89-91%. Dispositions in 2020 (excluding the completed phase-one dispositions under the market rotation plan) are estimated to be $95-$150 million, while acquisitions are likely to be up to $200 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
Currently, Highwoods Properties has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Highwoods 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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