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Bear of the Day: American Campus Communities, Inc. (ACC)

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American Campus Communities, Inc. (ACC - Free Report) owns, manages, and develops student housing communities in the U.S. The real estate investment trust is coming off a tough year after the coronavirus shook up the entire education landscape from preschool to college. And ACC’s near-term outlook remains rough even though its stock is trading near new 52-week highs.

Hard Times on Campus

American Campus Communities “is the largest owner, manager, and developer of high-quality student housing communities” in the U.S. At the end of last year, the firm owned 166 student housing properties, with the total reaching 206 properties with approximately 141,100 beds, including third-party managed properties.

ACC’s revenue had consistently grown over the years as college attendance increases in the U.S. and more students clamor for higher-end living. But the coronavirus, which forced many students to learn remotely, caused its revenue to sink in the last three quarters of 2020. These conditions saw American Campus Communities revenue slip roughly 8% in 2020.

Looking ahead, Zacks estimates call for ACC’s first quarter FY21 revenue to sink another 11%. Overall, the REIT’s fiscal 2021 sales are projected to slip roughly 1%.

Its funds from operations or FFO, which are essentially earnings, are expected to fall 21% in the first quarter and -0.50% on the year. This would follow an 18% decline on the bottom-line last year.

Bottom Line

American Campus Communities is projected to return to growth in 2022 and its outlook for 2021 could change if colleges and universities are able to reopen fully. That said, its bottom-line revisions have trended in the wrong direction to help it land a Zacks Rank #5 (Strong Sell) right now.

ACC holds “D” grades for Value and Momentum and an “F” for Growth in our Style Scores system. The stock is also part of the REIT and Equity Trust – Residential space that is currently in the bottom 13% of our over 250 Zacks industries. And the stock might be a little overheated considering that it’s up 50% in the last year and ACC is trading right near its 52-week highs.

Therefore, it might be best to stay away from ACC for now, or until it provides more clarity on its near-term future given the ongoing uncertainty on campuses around the country. And those looking for some solid income should consider keeping their eye on ACC.

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