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Will High Supply Impact Equity Residential (EQR) Q3 Results?
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Equity Residential (EQR - Free Report) is slated to report third-quarter 2017 results after the market closes on Oct 24.
Last quarter, this Chicago, IL-based residential real estate investment trust (REIT) delivered in-line results. Results reflected enhanced same-store and lease-up net operating income (“NOI”). Additionally, the company experienced lower corporate overhead. However, the company experienced adverse impact on NOI, primarily stemming from its 2016 huge disposition activity. Also, the company incurred higher interest expense in the quarter.
Moreover, the company met estimates in each of the trailing four quarters. The graph below depicts the surprise history of the company.
Let’s see how things are shaping up for Equity Residential prior to this announcement.
Factors to Consider
Per a study by the real estate technology and analytics firm, RealPage, Inc. , the U.S. apartment market reported stable rent growth, while occupancy remained healthy in the third quarter. However, the levels of rent growth have moderated from the earlier years. For new leases, effective rents inched up 0.9% during the quarter and 2.6% annually. Further, apartment occupancy came in at 95.5% for the third quarter across the country’s top 100 metros.
For Equity Residential, things do not appear to be much favorable. In fact, there is an increasing apartment supply in a number of the company’s markets. This high supply is likely to put pressure on rental rates and adversely affect revenue growth in the to-be-reported quarter. In addition, there is high concession activity amid higher supply, which remains a concern.
Moreover, the company made concerted efforts toward repositioning the portfolio from low barrier-to-entry/non-core markets to high barrier-to-entry/core markets, and opted for substantial sale out of its portfolio in recent years.
Though the assets sale might enable the company focus exclusively on its core, high-density urban markets over the long term, the earnings dilution impact from such a move cannot be bypassed in the near term. These issues are expected to affect the company’s net operating income in the quarter to be reported.
For third-quarter 2017, Equity Residential projects normalized funds from operations (FFO) per share in the range of 77-81 cents. The Zacks Consensus Estimate for the same is currently pegged at 79 cents.
Equity Residential’s activities during the quarter failed to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate remained unchanged over the last 60 days.
Additionally, year-to-date, shares of Equity Residential have gained 2.7% year to date, underperforming its industry’s ascend of 5.4%.
Earnings Whispers
Our proven model does not conclusively show that Equity Residential will likely beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Equity Residential is -1.04%. This is because the Most Accurate estimate is pegged at 78 cents, while Zacks Consensus Estimate is pegged at 79 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Equity Residential’s Zacks Rank #4 (Sell) further decreases the predictive power of ESP.
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.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Digital Realty Trust, Inc. (DLR - Free Report) , scheduled to release earnings on Oct 25, has an Earnings ESP of +0.24% and a Zacks Rank #2.
Cousins Properties Inc. (CUZ - Free Report) , slated to release quarterly numbers on Oct 25, has an Earnings ESP of +1.13% and a Zacks Rank #3.
Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. 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.
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Image: Bigstock
Will High Supply Impact Equity Residential (EQR) Q3 Results?
Equity Residential (EQR - Free Report) is slated to report third-quarter 2017 results after the market closes on Oct 24.
Last quarter, this Chicago, IL-based residential real estate investment trust (REIT) delivered in-line results. Results reflected enhanced same-store and lease-up net operating income (“NOI”). Additionally, the company experienced lower corporate overhead. However, the company experienced adverse impact on NOI, primarily stemming from its 2016 huge disposition activity. Also, the company incurred higher interest expense in the quarter.
Moreover, the company met estimates in each of the trailing four quarters. The graph below depicts the surprise history of the company.
Equity Residential Price and EPS Surprise
Equity Residential Price and EPS Surprise | Equity Residential Quote
Let’s see how things are shaping up for Equity Residential prior to this announcement.
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Factors to Consider
Per a study by the real estate technology and analytics firm, RealPage, Inc. , the U.S. apartment market reported stable rent growth, while occupancy remained healthy in the third quarter. However, the levels of rent growth have moderated from the earlier years. For new leases, effective rents inched up 0.9% during the quarter and 2.6% annually. Further, apartment occupancy came in at 95.5% for the third quarter across the country’s top 100 metros.
For Equity Residential, things do not appear to be much favorable. In fact, there is an increasing apartment supply in a number of the company’s markets. This high supply is likely to put pressure on rental rates and adversely affect revenue growth in the to-be-reported quarter. In addition, there is high concession activity amid higher supply, which remains a concern.
Moreover, the company made concerted efforts toward repositioning the portfolio from low barrier-to-entry/non-core markets to high barrier-to-entry/core markets, and opted for substantial sale out of its portfolio in recent years.
Though the assets sale might enable the company focus exclusively on its core, high-density urban markets over the long term, the earnings dilution impact from such a move cannot be bypassed in the near term. These issues are expected to affect the company’s net operating income in the quarter to be reported.
For third-quarter 2017, Equity Residential projects normalized funds from operations (FFO) per share in the range of 77-81 cents. The Zacks Consensus Estimate for the same is currently pegged at 79 cents.
Equity Residential’s activities during the quarter failed to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate remained unchanged over the last 60 days.
Additionally, year-to-date, shares of Equity Residential have gained 2.7% year to date, underperforming its industry’s ascend of 5.4%.
Earnings Whispers
Our proven model does not conclusively show that Equity Residential will likely beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here, as you will see below.
Zacks ESP: The Earnings ESP for Equity Residential is -1.04%. This is because the Most Accurate estimate is pegged at 78 cents, while Zacks Consensus Estimate is pegged at 79 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Equity Residential’s Zacks Rank #4 (Sell) further decreases the predictive power of ESP.
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.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
CoreSite Realty Corporation (COR - Free Report) , slated to release third-quarter results on Oct 26, has an Earnings ESP of +0.76% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Digital Realty Trust, Inc. (DLR - Free Report) , scheduled to release earnings on Oct 25, has an Earnings ESP of +0.24% and a Zacks Rank #2.
Cousins Properties Inc. (CUZ - Free Report) , slated to release quarterly numbers on Oct 25, has an Earnings ESP of +1.13% and a Zacks Rank #3.
Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. 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.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>