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Why Is Highwoods Properties (HIW) Up 0.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Highwoods Properties (HIW). Shares have added about 0.3% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

Highwoods Q1 FFO Miss Estimates, '24 View Revised

Highwoods reported first-quarter 2024 FFO per share of 89 cents, missing the Zacks Consensus Estimate of 90 cents. The figure was also lower than the prior-year quarter’s 98 cents.

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Quarterly results reflected a fall in occupancy and higher operating expenses. It also revised its outlook for 2024.

Rental and other revenues came in at $211.3 million, outpacing the Zacks Consensus Estimate of $207 million.

On a year-over-year basis, rental and other revenues fell marginally, while FFO per share declined 9.2%.

According to Ted Klinck, president and CEO of Highwoods, “Our high-quality portfolio in the BBDs of our SunBelt markets is generating strong demand from customers and prospects. We followed strengthening leasing volume late in 2023 with robust 2nd gen new leasing of over 400,000 square feet to begin the year and 157,000 square feet of 1st gen leases. We continued to improve our portfolio quality and long-term cash flow outlook by selling nearly $80 million of non-core properties in the first four months of the year.”

Quarter in Detail

Highwoods leased 922,000 square feet of second-generation office space in the first quarter, including 423,000 square feet of new leases. Moreover, the present development pipeline aggregates $506 million (at the company share). It is 41% pre-leased on a dollar-weighted basis.

Operating expenses were $156.6 million, up 5.3% on a year-over-year basis. We estimated the metric to be $156.7 million.

The average in-place cash rent was up 5.7% per square foot from the prior-year quarter, while the dollar-weighted average term was 6.7 years.

At the end of the reported quarter, Highwoods’ in-service portfolio occupancy (at the company share) declined 110 basis points year over year to 88.5%. We estimated the same to be 88.9%.

The same-property cash NOI increased marginally year over year to $141.5 million.

During the first quarter, Highwoods disposed of two non-core office buildings aggregating $16.9 million in Raleigh.

Balance-Sheet Position

The company exited the first quarter with $16.4 million of cash and cash equivalents, down from $25.1 million reported as of Dec 31, 2023.

The reported net debt-to-adjusted EBITDAre ratio was 6.09 compared with 6.13 at the end of Dec 31, 2023.

2024 Guidance

Highwoods revised its guidance for 2024.

The company now expects FFO per share to be in the range of $3.46-$3.61, revised from the prior guided range of $3.46-$3.64.

Highwoods expects same-property cash NOI, excluding termination fees, to be between 0.5% and 2%, revised from the prior guided range of 0% and 2%. The average occupancy is anticipated between 87% and 89%, unchanged from the prior guided range.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Highwoods Properties has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Highwoods Properties has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Highwoods Properties is part of the Zacks REIT and Equity Trust - Other industry. Over the past month, Alexandria Real Estate Equities (ARE), a stock from the same industry, has gained 2.6%. The company reported its results for the quarter ended March 2024 more than a month ago.

Alexandria Real Estate Equities reported revenues of $769.11 million in the last reported quarter, representing a year-over-year change of +9.8%. EPS of $0.97 for the same period compares with $2.19 a year ago.

For the current quarter, Alexandria Real Estate Equities is expected to post earnings of $2.35 per share, indicating a change of +4.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.3% over the last 30 days.

Alexandria Real Estate Equities has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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Highwoods Properties, Inc. (HIW) : Free Stock Analysis Report

Alexandria Real Estate Equities, Inc. (ARE) : Free Stock Analysis Report

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