Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Highwoods (HIW) Q1 FFO Beats Estimates, Revenues Miss

Highwoods Properties Inc. HIW reported first-quarter 2016 funds from operations (“FFO”) of 82 cents per share, which beat the Zacks Consensus Estimate by 3 cents. Further, the bottom line improved 10 cents year over year. Results reflected a strong same-property net operating income (“NOI”) growth.

Total revenue for the quarter rose 13.5% year over year to $164.9 million. However, the top line missed the Zacks Consensus Estimate of $166 million.

Quarter in Detail

Highwoods leased 902,000 square feet of second-generation office space during the quarter. Occupancy increased 80 basis points (bps) year over year to 92.7%, while same property cash net operating income (“NOI”) rose 3.7% year over year.

During first-quarter 2016, Highwoods sold majority of its wholly owned Country Club Plaza assets for $660 million. Also, the company sold $17 million worth other non-core assets during the quarter.
 
As of Mar 31, 2016, Highwoods had $3.3 million of cash and cash equivalents, down from $5 million as of Dec 31, 2015.

2016 Outlook

Highwoods has reaffirmed its 2016 FFO outlook of $3.18–$3.30. The Zacks Consensus Estimate of $3.24 falls within this range.

Our Viewpoint

Improving revenues from operating properties promise bright prospects for the company. In particular, Highwoods has been focusing on shifting its portfolio mix toward high-growth Sun Belt markets, where 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 currently carries a Zacks Rank #3 (Hold).

We now look forward to other REITs that are scheduled to release first-quarter 2016 results next week. These include General Growth Properties, Inc GGP, Taubman Centers, Inc. TCO and Vornado Realty Trust VNO.

Note: Funds from operations, 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
 


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
TAUBMAN CENTERS (TCO): Free Stock Analysis Report
 
GENL GRWTH PPTY (GGP): Free Stock Analysis Report
 
HIGHWOODS PPTYS (HIW): Free Stock Analysis Report
 
VORNADO RLTY TR (VNO): Free Stock Analysis Report
 
To read this article on Zacks.com click here.