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Hudson Pacific (HPP) is seeing favorable earnings estimate revision activity and has a positive Zacks Earnings ESP heading into earnings season.

The upheavals of 2023 rattled the housing market, witnessing soaring mortgage rates and stalled sales. In short, it created uncertainty for real estate investment trusts (REITs).

Besides Wall Street's top -and-bottom-line estimates for Hudson Pacific (HPP), review projections for some of its key metrics to gain a deeper understanding of how the company might have fared during the quarter ended December 2023.

We had HPP and its preferred shares on a "hold" as the risks offset the potential rewards. Both stocks have had a sharp rally off the October bottom. We dissect the recent numbers and tell you why we are going in the opposite direction.

Hudson Pacific Properties, Inc. (NYSE:HPP ) Q3 2023 Earnings Conference Call November 2, 2023 12:00 PM ET Company Participants Laura Campbell - EVP, IR & Marketing Victor Coleman - CEO and Chairman Mark Lammas - President Harout Diramerian - CFO Arthur Suazo - EVP, Leasing Conference Call Participants Alexander Goldfarb - Piper Sandler John Kim - BMO Capital Markets Michael Griffin - Citigroup Inc. Caitlin Burrows - Goldman Sachs Blaine Heck - Wells Fargo Securities Rich Anderson - Wedbush Ronald Kamdem - Morgan Stanley Thomas Catherwood - BTIG Dylan Burzinski - Green Street Advisors Operator Good morning, and welcome to the Hudson Pacific Properties Third Quarter 2023 Conference Call. [Operator Instructions] Please note, this event is being recorded.

While the top- and bottom-line numbers for Hudson Pacific (HPP) give a sense of how the business performed in the quarter ended September 2023, it could be worth looking at how some of its key metrics compare to Wall Street estimates and year-ago values.

Hudson Pacific Properties: I'm Out Of The Preferreds On Strike Worst-Case Scenario

Hudson Pacific Properties, Inc.'s valuation and dividend metrics are alluring. However, a deeper analysis identified a few red flags. The office segment, which generates approximately 84.5% of the company's revenues, faces challenges due to weak office occupancy and the rise of remote work. Hudson Pacific's pivot into a studio business model may provide diversified returns, but reallocating capital is challenging as most of the acquired units require redevelopment.

Sharply higher long-term borrowing costs for real estate during late summer have been a huge headwind for REIT operations and investment valuations. The demand for commercial real estate, especially office space, is being questioned with the appearance of stay-at-home living/work trends. However, things change. A slower economy into 2024 could reverse interest rates lower and pinpoint a bottom in REIT pessimism.