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Will Aimco (AIV) Disappoint Investors in Q2 Earnings Season?
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Apartment Investment & Management Co. (AIV - Free Report) – commonly known as Aimco – is slated to report second-quarter 2016 results on Jul 28, 2016, after the market closes. Last quarter, this residential real estate investment trust (“REIT”) recorded a positive surprise of 3.64%.
Aimco has a mixed earnings surprise history. Over the trailing four quarters, the company has surpassed the Zacks Consensus estimate on two occasions, reported in-line numbers in one, and missed the mark in another. Overall, Aimco has delivered an average positive surprise of 1.41%. The second-quarter 2016 funds from operation (“FFO”) for the company is currently pegged at 57 cents.
Let’s see how things are shaping up for Aimco prior to this announcement.
Aimco has a strong portfolio of B/B+ geographically diversified assets situated among the largest-coastal and job-growth markets in the U.S. The company is expected to benefit from solid demand for apartment communities. Its balance sheet is also projected to improve.
However, Aimco started to lower the number of lease expirations occurring in off-peak months to drive more leasing volume into peak season – the second and third quarters – wherein it enjoys greater pricing power. But this higher-lease expirations tally would push up frictional vacancy during the second quarter, lowering average daily occupancy and raising turnover expenses. As such, same store net operating income (NOI) growth is anticipated to bear the brunt.
Moreover, Aimco is revamping its portfolio through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and greater-than-expected growth. While it is a strategic fit on part of the company to sell its non-core assets and buy property in higher-growth infill areas, the dilutive impact on earnings from such asset dispositions cannot be avoided either in the near term.
For second-quarter 2016, Aimco provided pro forma FFO guidance in the band of 54–58 cents per share. The company expects NOI change to come within 3.5–4.5% compared with the prior-year quarter.
Earnings Whispers
Our proven model does not conclusively show that Aimco will beat on earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. However, that is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of 56 cents and the Zacks Consensus Estimate of 57 cents, is -1.75%.
Zacks Rank: Aimco currently has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes our surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks That Warrant a Look
Here are a few other stocks in the REIT sector that you may want to consider, as our model shows that they have the right combination of elements to report a positive surprise this quarter:
Mid-America Apartment Communities, Inc. (MAA - Free Report) has an Earnings ESP of +1.37% and a Zacks Rank #2. The company will report results on Jul 27.
Taubman Centers, Inc. has an Earnings ESP of +7.22% and a Zacks Rank #3. The company will release results on Jul 28.
Regency Centers Corporation (REG - Free Report) has an Earnings ESP of +1.25% and a Zacks Rank #3. The company will declare results on Aug 2.
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All earnings per share numbers presented in this write up represent FFO per share.
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Will Aimco (AIV) Disappoint Investors in Q2 Earnings Season?
Apartment Investment & Management Co. (AIV - Free Report) – commonly known as Aimco – is slated to report second-quarter 2016 results on Jul 28, 2016, after the market closes. Last quarter, this residential real estate investment trust (“REIT”) recorded a positive surprise of 3.64%.
Aimco has a mixed earnings surprise history. Over the trailing four quarters, the company has surpassed the Zacks Consensus estimate on two occasions, reported in-line numbers in one, and missed the mark in another. Overall, Aimco has delivered an average positive surprise of 1.41%. The second-quarter 2016 funds from operation (“FFO”) for the company is currently pegged at 57 cents.
Let’s see how things are shaping up for Aimco prior to this announcement.
APARTMENT INVT Price and EPS Surprise
APARTMENT INVT Price and EPS Surprise | APARTMENT INVT Quote
Factors to Consider
Aimco has a strong portfolio of B/B+ geographically diversified assets situated among the largest-coastal and job-growth markets in the U.S. The company is expected to benefit from solid demand for apartment communities. Its balance sheet is also projected to improve.
However, Aimco started to lower the number of lease expirations occurring in off-peak months to drive more leasing volume into peak season – the second and third quarters – wherein it enjoys greater pricing power. But this higher-lease expirations tally would push up frictional vacancy during the second quarter, lowering average daily occupancy and raising turnover expenses. As such, same store net operating income (NOI) growth is anticipated to bear the brunt.
Moreover, Aimco is revamping its portfolio through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and greater-than-expected growth. While it is a strategic fit on part of the company to sell its non-core assets and buy property in higher-growth infill areas, the dilutive impact on earnings from such asset dispositions cannot be avoided either in the near term.
For second-quarter 2016, Aimco provided pro forma FFO guidance in the band of 54–58 cents per share. The company expects NOI change to come within 3.5–4.5% compared with the prior-year quarter.
Earnings Whispers
Our proven model does not conclusively show that Aimco will beat on earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. However, that is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of 56 cents and the Zacks Consensus Estimate of 57 cents, is -1.75%.
Zacks Rank: Aimco currently has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes our surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks That Warrant a Look
Here are a few other stocks in the REIT sector that you may want to consider, as our model shows that they have the right combination of elements to report a positive surprise this quarter:
Mid-America Apartment Communities, Inc. (MAA - Free Report) has an Earnings ESP of +1.37% and a Zacks Rank #2. The company will report results on Jul 27.
Taubman Centers, Inc. has an Earnings ESP of +7.22% and a Zacks Rank #3. The company will release results on Jul 28.
Regency Centers Corporation (REG - Free Report) has an Earnings ESP of +1.25% and a Zacks Rank #3. The company will declare results on Aug 2.
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All earnings per share numbers presented in this write up represent FFO per share.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>