Apartment Investment & Management Co. (AIV - Analyst Report) or Aimco as the real estate investment trust (REIT) is popularly known, reported second quarter 2012 funds from operations (FFO) of 38 cents per share, compared to 29 cents in the year-ago period. The strong quarterly earnings were primarily due to higher rents chargeable.
We cover below the results of the recent earnings announcement, as well as the subsequent analysts’ estimate revisions and the Zacks ratings for the short and long-term outlook on the stock.
Second Quarter Review
Recurring FFO stood at 46 cents per share, compared to 27 cents in the year-ago period. Recurring FFO for second quarter 2012 was ahead of the Zacks Consensus Estimate by 6 cents.
During the quarter, total revenues stood at $270.9 million compared to $259.4 million in the year-ago period. Total revenues in the reported quarter beat the Zacks consensus estimate of $259 million
Read our full coverage on this earnings report: Aimco Beats Estimates
Earnings Estimate Revisions – Overview
Fiscal earnings estimates have moved in an upward direction since the earnings release. It suggests that the analysts are positive about the long-term performance of the company. We take a look at the earnings estimate details.
Agreement of Estimate Revisions
In the last seven days for 2012, the earnings estimates were increased by two out of the four analysts covering the stock, and one has decreased it. For 2013, four out of 13 analysts covering the stock had increased the estimates upward, while none moved it downward over the same period. This indicates a positive bias for the fiscal year earnings.
Magnitude of Estimate Revisions
Earnings estimate for 2012 has increased by two cents over the last seven days to $1.79 per share. For 2013, earnings estimates have increased from $1.99 to $2.02 during the same period, which indicates that the analysts are optimistic about the future performance of the company.
The long-term earnings estimate picture for Aimco is neutral. Aimco is one of the largest owners and operators of multifamily apartments in the U.S., with a diversified portfolio of conventional, affordable and student housing communities. The company has a strong portfolio of Class ‘B’ and Class ‘C’ properties primarily catering to the middle-income market. In addition, Aimco rents and leases its apartment units to a diverse base of residents. This provides a strong upside potential for the company
Aimco’s properties are geographically diversified, compared to several of its competitors, which helps to limit the effect of a significant local downturn. This enables a relatively stable revenue stream for the company, and augurs well for its long-term growth
However, Aimco competes with other housing alternatives such as rental apartments, condominiums and single-family homes that are available for rent, and new and existing condominiums and single-family homes available for sale. This puts considerable pressure on maintaining profitability through stringent cost-cutting measures
Aimco currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also maintain our long-term Neutral recommendation on the stock. One of its competitors, Equity Residential (EQR - Analyst Report) currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.
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.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrated stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education