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Highwoods Properties (HIW) Q2 FFO & Revenues Top Estimates

Zacks Equity Research

Highwoods Properties Inc.’s HIW second-quarter funds from operations (FFO) per share of 87 cents surpassed the Zacks Consensus Estimate of 85 cents. The figure remained flat year over year.

The company recorded year-over-year growth in same-property cash net operating income (NOI). Moreover, rents improved on both GAAP and cash basis. 

Particularly, rental and other revenues of approximately $184.1 million in the quarter outpaced the Zacks Consensus Estimate of $179.9 million. Further, the reported figure compares favorably with the year-earlier quarter’s reported tally of around $178.8 million.

Quarter in Detail

Highwoods leased 1.1 million square feet of second-generation office space during the second quarter. Rents were up 16.8% on a GAAP basis and 2.5% on a cash basis.

Same-property cash NOI) grew 3.1% year over year and 4.6% excluding the effect from Laser Spine’s sudden closure. The company ended the second quarter with occupancy of 90.9%.

At the end of the second quarter, Highwoods’ development pipeline totaled $503 million and was 80.3% pre-leased. During the quarter, the company placed two office properties in service, involving estimated investment of $203 million in aggregate. These properties were 98.4% occupied.

As of Jun 30, 2019, Highwoods had around $4.5 million of cash and cash-equivalents compared with around $3.8 million reported as of Dec 31, 2018. The company did not issue any shares under the ATM program.

2019 Outlook

Highwoods has revised its 2019 FFO per share guidance to $3.32-$3.38 from $3.29-$3.39 issued earlier. The Zacks Consensus Estimate for the same is currently pinned at $3.32.

Further, for the ongoing year, dispositions and acquisitions are anticipated in the range of $100 million to $150 million and up to $200 million, respectively.

Our Viewpoint

The U.S. office market continues to witness methodical growth. This comes at a time when the U.S economy is at its now record-long, economic expansion cycle. In fact, employment growth remained sturdy, with the April-June quarter adding 171,000 new jobs on an average. As the labor market maintains its hiring levels, it has likely supported healthy leasing activity for Highwood Properties.

Further, the renewed outlook for 2019 FFO per share has also boosted confidence in the company’s operating performance.

Highwoods Properties, Inc. Price, Consensus and EPS Surprise

Highwoods Properties, Inc. Price, Consensus and EPS Surprise

Highwoods Properties, Inc. price-consensus-eps-surprise-chart | 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 Iron Mountain Incorporated IRM, Vornado Realty Trust VNO and Boston Properties BXP.

Vornado Realty Trust will release its quarterly figures on Jul 29, Boston Properties on Jul 30 and Iron Mountain is scheduled to report the same on Aug 1.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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