It has been about a month since the last earnings report for Highwoods Properties (HIW). Shares have lost about 8.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Highwoods Properties due for a breakout? 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 drivers.
Highwoods Q2 FFO Beats on Leasing and Rent Growth, ‘26 View Up
Highwoods Properties reported second-quarter 2026 FFO of 90 cents per share, beating the Zacks Consensus Estimate by 4.7%. The figure increased 1.1% from the year-ago quarter.
Rental and other revenues rose 7.9% year over year to $216.38 million and surpassed the consensus mark of $210.96 million. Robust leasing, higher in-place rents and positive rent spreads supported the quarter. Same-property cash NOI increased 0.3%.
Highwoods Properties’ Leasing Volume Remains Robust
Highwoods signed 1.07 million square feet of second-generation leases, up from 923,000 square feet in the prior-year quarter. The total included 326,000 square feet of new leases, while the dollar-weighted average lease term was 6.4 years.
Second-generation leases generated GAAP rent growth of 20.9% and cash rent growth of 3.2%. Net effective rents were 8% above the previous five-quarter average, indicating that the company maintained healthy leasing economics despite elevated tenant improvement and leasing commission requirements.
Highwoods Improves Occupancy and In-Place Rents
Quarter-end in-service occupancy was 85.7% compared with 85.6% a year earlier. On properties owned throughout the second quarter, occupancy increased 110 basis points sequentially. The in-service leased rate stood at 89.6%, leaving a meaningful backlog of signed leases that have not yet commenced.
Average cash rental rates for in-place leases increased 2.6% year over year to $34.45 per square foot. Management expects occupancy to continue trending higher during the second half of 2026 as tenants begin occupying previously leased space.
Highwoods Advances Its Development Pipeline
The company placed Midtown East in Tampa into service during the quarter. Highwoods owns a 50% interest in the 143,000-square-foot development, which was 94.9% leased and 39.5% occupied. Its share of total investment was $41.5 million.
The active development pipeline totaled $230 million at Highwoods’ share and was 93% leased, with only $28 million left to fund. The company also signed 63,000 square feet of first-generation leases, lifting the 642,000-square-foot 23Springs project to 93% leased well ahead of its projected stabilization.
Highwoods Properties’ Asset Sales Strengthen Liquidity
Highwoods sold the 513,000-square-foot, fully occupied Bridgestone Tower in Nashville for $255 million. It also sold its 50% joint venture interest in a 10-acre land parcel for $4 million at its share.
The company expects to complete another $73.5 million of non-core dispositions during the third quarter. Including these pending transactions, announced and completed 2026 sales would total about $375 million. The additional proceeds increase financial flexibility but also create near-term earnings dilution because management does not assume reinvestment during the second half.
Highwoods Reduces Leverage and Raises Outlook
Net debt to adjusted EBITDAre improved to 6.24X from 6.72X in the first quarter. Highwoods ended the quarter with $145.38 million of cash and no borrowings under its $750 million revolving credit facility.
Management raised its 2026 FFO guidance to $3.46-$3.70 per share from $3.40-$3.68. The outlook assumes same-property cash NOI growth between negative 1% and positive 1% and year-end occupancy of 86.5%-88.5%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
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 has a grade of B on the value side, putting it in the top 40% for value investors.
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 downward for the stock, and the magnitude of this revision indicates a downward shift. Interestingly, 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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Highwoods Properties, Inc. (HIW): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).