Apartment Investment & Management Co. (AIV Quick QuoteAIV - Free Report) – commonly known as Aimco – is slated to report third-quarter 2016 results on Oct 27, 2016, after the market closes.

Last quarter, this residential real estate investment trust (“REIT”) recorded a positive surprise of 3.51%.

However, 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. This is depicted in the chart below.

APARTMENT INVT Price and EPS Surprise

 

APARTMENT INVT Price and EPS Surprise | APARTMENT INVT Quote

Overall, Aimco has delivered an average positive surprise of 1.37%. The third-quarter 2016 funds from operation (“FFO”) per share for the company is currently pegged at 56 cents.  

Let’s see how things are shaping up for Aimco prior to this announcement.

Factors to Consider

Aimco has a solid portfolio diversified both in terms of geography and price point. Its balance sheet is also projected to improve.

However, 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 third-quarter 2016, Aimco provided pro forma FFO guidance in a band of 52–56 cents per share. The company expects NOI change to come within 5.5–6.5% 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: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 56 cents. This leads to an Earnings ESP of 0.00% for Aimco.

Zacks Rank: Aimco currently has a Zacks Rank #4 (Sell).

With this combination of rank and ESP, any surprise is unlikely this quarter.

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.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

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:

CubeSmart (CUBE Quick QuoteCUBE - Free Report) has an Earnings ESP of +2.78% and a Zacks Rank #2. The company will release results on Oct 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mid-America Apartment Communities, Inc. (MAA Quick QuoteMAA - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank #3. The company will report results on Oct 27.

Post Properties Inc. has an Earnings ESP of +1.24% and a Zacks Rank #2. The company will declare results on Oct 31.


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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