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We are in the busiest week of the current-reporting cycle and the week represents one of full activity from residential real estate investment trust’s (REIT) earnings perspective also.
In fact, results from the big shots like AvalonBay Communities, Inc. (AVB - Free Report) , Equity Residential (EQR - Free Report) and UDR Inc. (UDR - Free Report) are already out in the early half of the week. Next come Apartment Investment and Management Company (AIV - Free Report) , Camden Property Trust (CPT - Free Report) and Essex Property Trust Inc. (ESS - Free Report) , that are slated to report their earnings on Thursday, Jul 28.
So far results have not been much impressive on the residential REIT front. While backed by higher average rental rates, AvalonBay’s second-quarter 2016 core funds from operations (“FFO”) grew 8.6% from the year-ago tally to $2.03 per share, but the figure missed the Zacks Consensus Estimate of $2.09.
Moreover, high-disposition activity in 2016 has led to a decline in Equity Residential’s normalized FFO per share for second-quarter 2016, which came in at 76 cents, missing the Zacks Consensus Estimate by a penny and down from the prior-year quarter figure of 85 cents. Further, the company has lowered its annual revenue growth expectations citing elevated levels of new supply and a slow-down in high- paying jobs in San Francisco and New York.
On the other hand, UDR managed to report second-quarter 2016 FFO of 44 cents per share, in line with the Zacks Consensus Estimate. The figure was up 7.3% from the prior-year quarter tally of 41 cents and the improvement was driven by growth in same-store revenue and net operating income (“NOI”).
No doubt, the New York and San Francisco markets are experiencing rising supply and this remains a concern as elevated supply of new units usually curtails landlords’ capability to command more rents and leads to lesser absorption.
In fact, delivery of new supply in a number of markets has moderated the annual effective rent growth that came in at 3.7% in Q2, reflecting a 134-basis-point (bps) decrease from the solid 5.1% a year ago, per the early end-of-quarter apartment numbers from Axiometrics.
However, as new graduates enter the workforce and start looking for a place to live, along with renter families seeking settlement well ahead of the upcoming school year, rent growth was notably stronger in Q2, with quarterly effective rent growth coming in at 2.3% in the second quarter against 0.5% in the first.
Let’s now take a look into how these three residential REITs are expected to perform, when they report their second-quarter 2016 results on Jul 28.
Apartment Investment and Management Company – commonly known as 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 has an Earnings ESP of -1.75% and a Zacks Rank #3 (Hold).
Our proven model does not conclusively show that Aimco is likely to beat on earnings this quarter. This is because the company lacks the right combination of the two key ingredients – a positive Earnings ESP (the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3.
Aimco is expected to benefit from solid demand for apartment communities. Its balance sheet is also projected to improve. However, though the company’s portfolio-revamping initiative through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and greater-than-expected growth is a strategic fit for the long term, the dilutive impact on earnings from such asset dispositions cannot be avoided either in the near term. (Read more: Will Aimco Disappoint Investors in Q2 Earnings Season?)
Camden Property Trust is engaged in the ownership, development, acquisition and management of multi-family apartment communities in the U.S. The company has an Earnings ESP of 0.00% and a Zacks Rank #3. Despite a favorable Zacks Rank, a zero ESP lowers the chances of a beat this quarter.
Essex Property Trust is engaged in the acquisition, development, redevelopment and management of multifamily residential properties in supply constrained markets. Specifically, the company enjoys concentration of assets in select coastal submarkets along the West Coast. It has an Earnings ESP of 0.00% and a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes our surprise prediction difficult.
Essex has a strong property base and a sturdy balance sheet. However, rising supply remains a concern. Particularly, the supply deliveries in the San-Francisco market might restrict the growth tempo of the company in the to-be-reported quarter. (Read more: Is Essex Property Set to Beat This Earnings Season?)
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
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 EPS numbers presented in this write up represent FFO per share.
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Residential REITs Jul 28 Q2 Earnings Lineup: AIV, CPT, ESS
We are in the busiest week of the current-reporting cycle and the week represents one of full activity from residential real estate investment trust’s (REIT) earnings perspective also.
In fact, results from the big shots like AvalonBay Communities, Inc. (AVB - Free Report) , Equity Residential (EQR - Free Report) and UDR Inc. (UDR - Free Report) are already out in the early half of the week. Next come Apartment Investment and Management Company (AIV - Free Report) , Camden Property Trust (CPT - Free Report) and Essex Property Trust Inc. (ESS - Free Report) , that are slated to report their earnings on Thursday, Jul 28.
So far results have not been much impressive on the residential REIT front. While backed by higher average rental rates, AvalonBay’s second-quarter 2016 core funds from operations (“FFO”) grew 8.6% from the year-ago tally to $2.03 per share, but the figure missed the Zacks Consensus Estimate of $2.09.
Moreover, high-disposition activity in 2016 has led to a decline in Equity Residential’s normalized FFO per share for second-quarter 2016, which came in at 76 cents, missing the Zacks Consensus Estimate by a penny and down from the prior-year quarter figure of 85 cents. Further, the company has lowered its annual revenue growth expectations citing elevated levels of new supply and a slow-down in high- paying jobs in San Francisco and New York.
On the other hand, UDR managed to report second-quarter 2016 FFO of 44 cents per share, in line with the Zacks Consensus Estimate. The figure was up 7.3% from the prior-year quarter tally of 41 cents and the improvement was driven by growth in same-store revenue and net operating income (“NOI”).
No doubt, the New York and San Francisco markets are experiencing rising supply and this remains a concern as elevated supply of new units usually curtails landlords’ capability to command more rents and leads to lesser absorption.
In fact, delivery of new supply in a number of markets has moderated the annual effective rent growth that came in at 3.7% in Q2, reflecting a 134-basis-point (bps) decrease from the solid 5.1% a year ago, per the early end-of-quarter apartment numbers from Axiometrics.
However, as new graduates enter the workforce and start looking for a place to live, along with renter families seeking settlement well ahead of the upcoming school year, rent growth was notably stronger in Q2, with quarterly effective rent growth coming in at 2.3% in the second quarter against 0.5% in the first.
Let’s now take a look into how these three residential REITs are expected to perform, when they report their second-quarter 2016 results on Jul 28.
Apartment Investment and Management Company – commonly known as 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 has an Earnings ESP of -1.75% and a Zacks Rank #3 (Hold).
Our proven model does not conclusively show that Aimco is likely to beat on earnings this quarter. This is because the company lacks the right combination of the two key ingredients – a positive Earnings ESP (the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3.
Aimco is expected to benefit from solid demand for apartment communities. Its balance sheet is also projected to improve. However, though the company’s portfolio-revamping initiative through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and greater-than-expected growth is a strategic fit for the long term, the dilutive impact on earnings from such asset dispositions cannot be avoided either in the near term. (Read more: Will Aimco Disappoint Investors in Q2 Earnings Season?)
APARTMENT INVT Price and EPS Surprise
APARTMENT INVT Price and EPS Surprise | APARTMENT INVT Quote
Camden Property Trust is engaged in the ownership, development, acquisition and management of multi-family apartment communities in the U.S. The company has an Earnings ESP of 0.00% and a Zacks Rank #3. Despite a favorable Zacks Rank, a zero ESP lowers the chances of a beat this quarter.
CAMDEN PPTY TR Price and EPS Surprise
CAMDEN PPTY TR Price and EPS Surprise | CAMDEN PPTY TR Quote
Essex Property Trust is engaged in the acquisition, development, redevelopment and management of multifamily residential properties in supply constrained markets. Specifically, the company enjoys concentration of assets in select coastal submarkets along the West Coast. It has an Earnings ESP of 0.00% and a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes our surprise prediction difficult.
Essex has a strong property base and a sturdy balance sheet. However, rising supply remains a concern. Particularly, the supply deliveries in the San-Francisco market might restrict the growth tempo of the company in the to-be-reported quarter. (Read more: Is Essex Property Set to Beat This Earnings Season?)
ESSEX PPTY TR Price and EPS Surprise
ESSEX PPTY TR Price and EPS Surprise | ESSEX PPTY TR Quote
Stay tuned! Check back on our full write-up on earnings releases of these stocks.
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 EPS 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 >>