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Why Is Highwoods Properties (HIW) Up 1.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Highwoods Properties (HIW). Shares have added about 1.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Highwoods Properties due for a pullback? 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 Q1 FFO & Revenue Beat Estimates, NOI Rises

Highwoods’ first-quarter 2021 FFO per share of 91 cents surpassed the Zacks Consensus Estimate of 87 cents. Moreover, rental and other revenues of $183.8 million outpaced the consensus mark of $180.6 million.

Decent leasing activity as well as rent and same-property cash NOI growth aided results.

However, FFO per share declined 2.2% year over year. Rental and other revenues in the first quarter also decreased 4.7% year over year, reflecting the adverse impacts of the pandemic.

Quarter in Detail

Highwoods leased 553,000 square feet of second-generation office space in the first quarter, including 247,000 square feet of new leases. In-place cash rent was up 5.3% per square foot on a year-over-year basis.

At the end of the reported quarter, occupancy was 89.6%, declining from 90.3% as of Dec 31, 2020.

Excluding the negative impacts of the temporary rent deferral agreements, same-property cash NOI increased 4.8% year over year.

As of Mar 31, 2021, Highwoods had $49.3 million of cash and cash equivalents compared with $109.3 million reported as of Dec 31, 2020. The company exited the reported quarter with the full availability of funds under its new credit facility.

In the first quarter, it sold a 100,000-sq-ft non-core office building in Atlanta for $30.7 million.

Guidance

Highwoods expects 2021 FFO per share of $3.54-$3.66 compared with $3.50-$3.66 mentioned earlier. This indicates an increase of 2 cents at the midpoint. The updated guidance does not include the financial impacts of planned investment activities related to the acquisition of a portfolio of office assets from Preferred Apartment Communities, Inc. announced on Apr 19, 2021.

Same-property cash NOI for 2021 is projected at 3.5-5.25%, up from 3-5% mentioned earlier, whereas year-end occupancy is estimated to be 88.5-91.5%. Dispositions in 2021 are expected to be $250-$300 million, while acquisitions are likely to be $680-$769 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Highwoods Properties has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 upward for the stock, and the magnitude of these revisions has been net zero. Notably, 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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