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Is a Beat in Store for Equity Residential (EQR) in Q4 Earnings?
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Equity Residential (EQR - Free Report) is slated to report fourth-quarter and full-year 2022 results on Feb 9 after the closing bell. The company’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Chicago, IL-based residential real estate investment trust reported a surprise of 1.10% in terms of FFO per share. Results reflected healthy demand during the primary leasing season.
Over the trailing four quarters, Equity Residential surpassed the Zacks Consensus Estimate on three occasions and missed the same on the other, the average surprise being 1.14%. The graph below depicts this surprise history:
Let’s see how things have shaped up for EQR before this announcement.
Key Factors
For the U.S. apartment market, low consumer confidence and high inflation have taken a toll, with net demand for apartments ending in negative territory for calendar 2022, per a report from the real estate technology and analytics firm RealPage. Despite solid job growth and wage gains, there was weak demand for all types of housing.
Amid this soft demand, new-lease apartment rents fell in December for the fourth consecutive month, declining another 0.4%. The cumulative rent drop was around 1.6% since September. Also, the national apartment vacancy surged from a record seasonal low of 2.5% one year ago to 5.0% in December 2022.
Despite this softness in demand, Equity Residential’s quarterly performance is likely to have been supported by its portfolio diversification efforts in the urban and suburban markets. It has a healthy balance sheet and banks on technology, scale and organizational capabilities to drive growth. EQR’s target resident is more affluent, with lower unemployment and favorable prospects ahead.
Per its November Investor Update presentation, rents peaked in early August 2022 and have moderated since then. The percentage of residents renewing remains healthy and consistent with historical levels after normalization from record-high levels after the pandemic in late 2021 and early 2022.
Per its preliminary data as of Oct 20, 2022, physical occupancy was 96.2% in October, while the new lease change was 5.3%. From the beginning of 2022 through Oct 20, 2022, the blended rate was 12.5%.
Currently, the Zacks Consensus Estimate for the company’s quarterly revenues stands at $697.06 million, indicating an 8.05% increase year over year. The consensus estimate for same-store revenue growth is pegged at 9.75%. The consensus estimate for physical occupancy is presently pegged at 96.20% for the fourth quarter, down 30 basis points (bps) sequentially and 20 bps year over year.
For the fourth quarter of 2022, Equity Residential projected normalized FFO per share in the band of 94-96 cents.
Before the fourth-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly normalized FFO per share has remained unrevised in the past month at 94 cents. However, this suggests year-over-year growth of 14.6%.
For the full-year 2022, Equity Residential projected normalized FFO per share in the band of $3.52-$3.54. The company’s full-year guidance incorporates a same-store revenue growth projection of 10.6%, while expenses are expected to increase by 3.3%. Consequently, NOI is estimated to expand 14.25%. Physical occupancy is expected at 96.4%.
For the full year, the Zacks Consensus Estimate for normalized FFO per share is pegged at $3.52. The figure indicates a 17.7% increase year over year on 10.9% year-over-year growth in revenues to $2.73 billion.
Here Is What Our Quantitative Model Predicts
Our proven model predicts a surprise in terms of FFO per share for Equity Residential this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.
Equity Residential currently carries a Zacks Rank of 3 and has an Earnings ESP of +1.93%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks That Warrant a Look
Here are three other stocks from the broader REIT sector — AvalonBay Communities, Inc. (AVB - Free Report) , Digital Realty Trust, Inc. (DLR - Free Report) and Extra Space Storage Inc. (EXR - Free Report) — you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Is a Beat in Store for Equity Residential (EQR) in Q4 Earnings?
Equity Residential (EQR - Free Report) is slated to report fourth-quarter and full-year 2022 results on Feb 9 after the closing bell. The company’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Chicago, IL-based residential real estate investment trust reported a surprise of 1.10% in terms of FFO per share. Results reflected healthy demand during the primary leasing season.
Over the trailing four quarters, Equity Residential surpassed the Zacks Consensus Estimate on three occasions and missed the same on the other, the average surprise being 1.14%. The graph below depicts this surprise history:
Equity Residential Price and EPS Surprise
Equity Residential price-eps-surprise | Equity Residential Quote
Let’s see how things have shaped up for EQR before this announcement.
Key Factors
For the U.S. apartment market, low consumer confidence and high inflation have taken a toll, with net demand for apartments ending in negative territory for calendar 2022, per a report from the real estate technology and analytics firm RealPage. Despite solid job growth and wage gains, there was weak demand for all types of housing.
Amid this soft demand, new-lease apartment rents fell in December for the fourth consecutive month, declining another 0.4%. The cumulative rent drop was around 1.6% since September. Also, the national apartment vacancy surged from a record seasonal low of 2.5% one year ago to 5.0% in December 2022.
Despite this softness in demand, Equity Residential’s quarterly performance is likely to have been supported by its portfolio diversification efforts in the urban and suburban markets. It has a healthy balance sheet and banks on technology, scale and organizational capabilities to drive growth. EQR’s target resident is more affluent, with lower unemployment and favorable prospects ahead.
Per its November Investor Update presentation, rents peaked in early August 2022 and have moderated since then. The percentage of residents renewing remains healthy and consistent with historical levels after normalization from record-high levels after the pandemic in late 2021 and early 2022.
Per its preliminary data as of Oct 20, 2022, physical occupancy was 96.2% in October, while the new lease change was 5.3%. From the beginning of 2022 through Oct 20, 2022, the blended rate was 12.5%.
Currently, the Zacks Consensus Estimate for the company’s quarterly revenues stands at $697.06 million, indicating an 8.05% increase year over year. The consensus estimate for same-store revenue growth is pegged at 9.75%. The consensus estimate for physical occupancy is presently pegged at 96.20% for the fourth quarter, down 30 basis points (bps) sequentially and 20 bps year over year.
For the fourth quarter of 2022, Equity Residential projected normalized FFO per share in the band of 94-96 cents.
Before the fourth-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly normalized FFO per share has remained unrevised in the past month at 94 cents. However, this suggests year-over-year growth of 14.6%.
For the full-year 2022, Equity Residential projected normalized FFO per share in the band of $3.52-$3.54. The company’s full-year guidance incorporates a same-store revenue growth projection of 10.6%, while expenses are expected to increase by 3.3%. Consequently, NOI is estimated to expand 14.25%. Physical occupancy is expected at 96.4%.
For the full year, the Zacks Consensus Estimate for normalized FFO per share is pegged at $3.52. The figure indicates a 17.7% increase year over year on 10.9% year-over-year growth in revenues to $2.73 billion.
Here Is What Our Quantitative Model Predicts
Our proven model predicts a surprise in terms of FFO per share for Equity Residential this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.
Equity Residential currently carries a Zacks Rank of 3 and has an Earnings ESP of +1.93%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks That Warrant a Look
Here are three other stocks from the broader REIT sector — AvalonBay Communities, Inc. (AVB - Free Report) , Digital Realty Trust, Inc. (DLR - Free Report) and Extra Space Storage Inc. (EXR - Free Report) — you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.
AvalonBay Communities is slated to report quarterly numbers on Feb 8. AVB has an Earnings ESP of +1.43% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Digital Realty, scheduled to report quarterly numbers on Feb 16, has an Earnings ESP of +0.99% and carries a Zacks Rank of 3.
Extra Space Storage is slated to report quarterly numbers on Feb 22. EXR has an Earnings ESP of +0.42% and has a Zacks Rank of 3 presently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.