The Zacks Analyst Blog Highlights: Marriott International, Equity Residential, Mid American Apartments, Avalon Bay and Apartment Investors

For Immediate Release

Chicago, IL – October 7, 2011 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Marriott International Inc. (MAR - Analyst Report), Equity Residential (EQR - Analyst Report), Mid American Apartments (MAA - Snapshot Report), Avalon Bay (AVB - Analyst Report) and Apartment Investors (AIV - Analyst Report).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Thursday’s Analyst Blog:

Marriott Beats on EPS and Revenue

Marriott International Inc. (MAR - Analyst Report) reported third quarter 2011 earnings of 29 cents per share up 32% year over year. Earnings were also within the company’s guided range of 25 cents to 29 cents.

However, after accounting for other non cash charges of 73 cents the company reported a loss of 52 cents a share, reversing a year-ago profit of 23 cents a share.

The year-over-year results improved based on the company’s strong revenue per available room. Total revenue aggregated $2.97 billion, up 9% year over year.

Outlook

For the fourth quarter, the company estimates that North American comparable system-wide REVPAR will increase in the range of 6% to 8%. Outside North America, the company anticipates fourth quarter 2011 comparable system-wide REVPAR on a constant dollar basis to increase 3% to 5%, or 5% to 7% excluding the Middle East and Japan markets.  

The company remains on track to spin off its Timeshare business into a new publicly traded company in the form of a tax-free dividend to its existing shareholders. The transaction is expected to be completed in the fourth quarter 2011. The company expects fourth quarter 2011 Timeshare contract sales will total $200 million to $210 million and Timeshare sales and services revenue, net of direct expenses, will total approximately $68 million to $73 million.

The company expects investment spending in 2011 to total approximately $500 million to $600 million, including $50 million to $100 million for maintenance capital spending. The company expects full year 2011 adjusted EBITDA to total $1,112 million to $1,132 million.

Apartment Vacancy Rate Plunging

The Real Estate Data firm Reis announced this morning that the apartment vacancy rate fell to 5.6% in the third quarter, down from 6.0% in the second quarter and 7.1% a year ago. The rate peaked in the fourth quarter of 2009 at 8.0%.

This is a hopeful sign about the recovery of the housing market. First, some of the excess inventory in the rental market is being cleared up, and then later, the excess inventory in the for sale market will start to be absorbed.

It is not clear, though, from the data if this is a reflection of higher household formation, or simply people who used to be homeowners who have been foreclosed upon or otherwise lost their houses. If it is a rise in the rate of household formation, which has been very depressed over the last few years, that is extremely good news. The vacancy rate is now back to pre-crisis levels.

However, not all of the improvement is coming from higher demand. Over the last two years, apartment construction has plunged along with just about every other part of construction. As a result, only 8,200 new units came online in the third quarter, which is a record low (OK, the data only goes back to 1999). A total of 36,000 net units were filled in the quarter but that is down from 42,000 units filled on balance in the second quarter.

More recently, multi-family housing starts have picked up, but most of those units will not come on line and be available to rent until the middle of 2012. In the meantime, though, it is a bright spot for the long-beleaguered construction industry, and one place where construction workers are able to find jobs. Since the start of the Great Recession/Lesser Depression, the construction industry has been responsible for 31% of all the jobs lost in the country.

As is normal when supply is low and demand is growing, prices rose. The average rent in the 82 markets covered by Reis (most of the major metropolitan areas) rose to $1,004 per month (after the effect of any discounts or incentives), up 2.4% from a year ago. While that is not exactly Zimbabwesque, it is a bit on the hot side.

If the rise in regular rents (i.e. what a tenant pays to a landlord) starts to bleed over into owner’s equivalent rents (or OER. what the government figures you pay yourself to live in the house you own) it could have negative implications for the CPI. Together regular rent and OER make up 31% of the CPI, more than food and energy combined.  Since rent is neither food nor energy, it makes up a much bigger part of the core CPI, almost 40%.

The obvious beneficiaries of the decline in vacancies and the rise in rents are the Apartment REITs like Equity Residential (EQR - Analyst Report), Mid American Apartments (MAA - Snapshot Report), Avalon Bay (AVB - Analyst Report) and Apartment Investors (AIV - Analyst Report).

The yields on these stocks are not as attractive as they have been in the past relative to the rest of the market, given the huge rise in dividend yields for the rest of the market. They are, however, very attractive relative to long-term interest rates. With falling vacancies and rising rents, their earnings are set to rise. As REITs they are required to pay out almost all their earnings, so a year from now, your effective yield on cost could be much greater than the trailing dividend yield of generally between 2.2% to 4.2% that firms in this group are currently being quoted at.

In the short term, most of the firms in the group hold Zacks #3 Ranks of 3, or Hold. The one exception, MAA holds a Zacks #2 Rank, or Buy. It also has the highest yield in the group, and as such should probably be the first one you investigate.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
http://www.zacks.com

Read the full analyst report on MAR

Read the full analyst report on EQR

Read the full analyst report on MAA

Read the full analyst report on AVB

Read the full analyst report on AIV