We continue to have a positive view on the company's medium-term outlook and the stock's dividend yield is attractive. We used an earnings multiple of around 13.0x our 2008 EPS to arrive at the target price of $73.50.
Near-Term Tough for Boston Ppys
Boston Properties, Inc. (BXP) recently announced the acquisition of the GM building in New York for $2.8 billion. The company will own 60% of this asset in conjunction with two partners. Long term, this is a good buy and the company is getting a trophy asset with in place leases that are well below market.
Although, the company will have to wait years to realize the full benefits, as half of in place leases will not roll for over 10 years. Operationally, the company's portfolio continues to perform well; rental rates continue to increase on new leases and overall portfolio occupancies are high.
On the other hand, the national employment picture continues to worsen. We think office landlords will have a difficult time in the coming quarters; corporations are not expanding and we expect layoffs to continue. We rate the shares a Hold due to the state of the economy and have a negative near-term view of the office sector.
BXP has superior assets located in high barrier, urban markets, and in a down market the company is better positioned than all of its competitors. Despite the GM purchase, BXP still has a strong balance sheet will low overall debt. We are raising our 2007 FFO estimate by $0.05 per share to $2.70 to account for the new asset purchases. We are setting our price target at $100.00 per share or 21x 2008 FFO estimates.
Williams Remains a Buy
We are reiterating our Buy recommendation, earnings estimates and price objective for Williams Companies, Inc. (WMB) shares following the company's quarterly results. The company remains well-positioned to capitalize on attractive growth opportunities in its low-risk exploration and production (E&P) business, besides enjoying strong leverage to continued strength in natural gas liquids margins in its Midstream business.
We believe that Williams' Rockies development drilling program focused on the Piceance Basin is the key to its upstream growth going forward. Production is expected to grow at double-digit rates this year. The recent 10% dividend increase, a $1 billion buyback program, and creation of a pipeline MLP are some the important catalysts for future growth. We believe that the company has moved beyond its restructuring phase and is now clearly ready to focus on growth opportunities.
For 2009, the company guided towards earnings in the $2.6 billion to $3.2 billion range and EPS in the range of $1.80 and $2.30. The previous ranges were $2.5 billion to $3.1 billion in consolidated segment profit and earnings per share of $1.70 to $2.20.
