Highwoods (HIW) Q1 FFO, Revenues Surpass Estimates

Highwoods Properties Inc. (NYSE:HIW) reported first-quarter 2017 funds from operations (FFO) of 80 cents per share, beating the Zacks Consensus Estimate by 2 cents. The prior-year quarter’s FFO per share figure was 82 cents.

Results reflected robust growth in same-property net operating income (NOI) and strong leasing metrics.

Total revenue for the quarter increased 2.8% year over year to $169.4 million. Also, the top line came above than the Zacks Consensus Estimate of $165.8 million.

Quarter in Detail

Highwoods leased 715,000 square feet of second-generation office space during the quarter. Same property cash NOI rose 5.5% year over year.

The company announced the development worth $126 million, which is 86% pre-leased. Also, the company put in place $96 million development in service, which is 93% leased. Along with these, the company sold one Memphis-based non-core building for $13 million.

As of Mar 31, 2017, Highwoods had $4.9 million of cash and cash equivalents, down from $49.5 million as of Dec 31, 2016.

2017 Outlook

Highwoods revised its 2017 FFO per share guidance range to $3.29–$3.40 from the previous range of $3.27–$3.40 per share. The Zacks Consensus Estimate for 2017 is $3.35.

Our Viewpoint

Improving operating performance reflects bright prospects for the company. Highwoods, particularly, has been focusing on shifting its portfolio mix toward high-growth Sun Belt markets, wherein long-term favorable demographic trends are expected to drive above-average job growth.

However, a large development pipeline exposes the company to higher construction costs, lease-up risks and entitlement delays. Moreover, increasing competition in the space restricts its ability to command relatively higher rents.

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 Digital Realty Trust, Inc. (NYSE:DLR) , Ventas, Inc. (NYSE:VTR) and Host Hotels & Resorts, Inc. (NYSE:HST) , which are expected later this week.

Note: All EPS numbers presented in this write-up represent funds from operations (FFO) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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