American Campus Communities, Inc.
by Todd BuntonSeptember 23, 2011 | Comments : 0 Recommended this article: (0)
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The company recently delivered another solid positive earnings surprise as occupancy and rental rates both increased year-over-year. Management raised its guidance for the remainder of 2011, prompting analysts to revise their estimates higher too. It is a Zacks #2 Rank (Buy) stock.
In addition to stable growth, ACC offers a dividend that yields a solid 3.7%.
Growth + Defense
American Campus Communities is a real estate investment trust (REIT) focused on the development and management of student housing communities in the U.S. It owns 110 student housing properties with more than 67,000 beds.
Student housing is an industry benefitting from favorable tailwinds as more and more young people pursue college degrees. It is also an industry that is somewhat immune to the overall economy. That's good news for ACC if another recession is right around the corner.
Second Quarter Results
American Campus Communities delivered another strong quarter marked by higher revenue and expanding profit margins. Funds from operation (FFO) per share rose 20% to 42 cents per share, beating the Zacks Consensus Estimate by a penny.
Revenue jumped 22% year-over-year to $90.2 million, due in part to acquisitions as well as higher occupancy and rental rates.
Operating income rose 23% as operating expenses fell 10 basis points to 76.7% of total revenue.
Management raised its guidance for the remainder of the year following strong Q2 results. The company now expects FFO per share between $1.71 and $1.78, up from previous guidance of $1.64-$1.76.
Analysts revised their estimates higher too, sending the stock to a Zacks #2 Rank (Buy). The Zacks Consensus Estimate for 2011 increased to $1.77, corresponding with 12% growth in FFO per share.
The 2012 consensus estimate rose to $1.94, representing 9% growth.
These estimates should remain fairly stable even if we are headed into another recession. The student housing sector is very defensive and usually weathers economic downturns very well.
American Campus Communities continues to pay out the same 33.775 cent quarterly dividend it has since 2005. This currently corresponds to a stellar 3.7% dividend yield.
Shares are up around 8% since I last wrote about ACC on May 24. The S&P has fallen around 15% over the same period.
The valuation picture still looks reasonable for ACC. Shares trade at 19.7x 12-month forward earnings, in-line with its peers, but a slight premium to its historical median.
Its price to book ratio of 2.0 is also in-line with the industry average.
The Bottom Line
Because it operates in the student housing industry, American Campus Communities should continue to generate stable FFO growth for many years. With a solid 3.7% dividend yield, rising estimates and reasonable valuation, ACC remains an attractive stock for growth and income investors.
This Week's Growth & Income Zacks Rank Buy Stocks:
Techne Corporation (TECH) delivered strong results for the fourth quarter of its fiscal 2011. Estimates rose off of the solid quarter, sending the stock to a Zacks #2 Rank (Buy). Based on consensus earnings estimate, analysts project 13% EPS growth in 2012 and 10% growth in 2013. The company also pays a dividend that yields a solid 1.5%. Read the full article.
Grupo Aeroportuario del Sureste (ASR) recently delivered better than expected second quarter results, prompting analysts to raise their earnings estimates for both 2011 and 2012. This sent the stock to a Zacks #2 Rank (Buy). Based on current consensus estimates, analysts project 15% EPS growth this year and 16% growth next year. On top of this growth the company pays a dividend that yields a stellar 4.7%. Read the full article.
j2 Global Communications (JCOM) recently delivered its 5th consecutive positive earnings surprise on 40% revenue growth and 41% EPS growth. Management raised its guidance for the remainder of the year, prompting analysts to revise their estimates higher. This sent the stock to a Zacks #2 Rank (Buy). The company also recently initiated a dividend that yields a solid 2.6%. Read the full article.
Limited Brands (LTD) posted a remarkable 11% increase in same-store sales for the month of August. Analysts have been raising their estimates over the last several months as the company has delivered four consecutive positive earnings surprises. It is a Zacks #2 Rank (Buy). Limited also recently raised its quarterly dividend by 33% and yields a solid 2.0%. Read the full article.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research.
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