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Post Properties (PPS)

The housing numbers yesterday may have looked fairly strong, but the bulk of the growth seemed to come from multi-family/rental unit type housing.  This is no mistake; rent rates in the US are near all-time highs and they have been on the rise for a couple years now after the crash in 2009, as doubtful buyers move into a flexible, easy rent regimen.

If you live in a major metro area in the US, you might notice many more condos available to purchase than for rent.  Those rentals are usually carrying big premiums because of less rental inventory and still unsure homebuyers.  Post Properties manages many mid- to high-end communities in different markets across the US, and is reaping the benefits of the rental boom.

Company Description
Post Properties is a REIT (real estate investment trust) that focuses on providing resort-style garden apartments and high-density urban apartments with an emphasis on resident service and a strong brand identification.  The operate assets across the US in DC, Florida, Georgia, North Carolina, New York and Texas in select cities. 

Anecdotally, I can tell you that they not only have a prominent brand presence in Dallas, but have shaped the city’s neighborhoods in a big way (for the better).  They have a reputation for quality in the city.

Post focuses most of their business on the Southern US. 

They also sell homes under the Post Preferred Homes division.  The ability to develop new properties for sale or to convert existing assets into upscale for-sale housing will give them an edge as the housing market improves and more buyers emerge.  Given the recent rental boom, the company has been winding down this division.

For the time being, rentals (price and occupancy) remain strong.  This trend recently prompted Cantor Fitzgerald to start their coverage of Post as a Buy with a target of $50.  Keep in mind that cheap housing and expensive rent rates could create a shift in the housing market, driving people away from apartment living.  For Post, their amenities and quality should help retain renters, at least for the next few quarters and until housing truly begins its recovery.

Financial Profile & Earnings
Post Properties is trading at about 20 times forward earnings.  As a REIT they are required to throw off 90% of their profits in the form of dividends.  Currently the company is yielding about 2%. They have managed to positively surprise analysts for the last four quarters at an average of almost 20%.

Throughout 2011 the company raised guidance by over 30%, which was more than any apartment REIT.  As of their most recent quarter, they generated 78.61 million in revenue and reported earnings of 52 cents a share.  They are expected to make 52 cents this quarter and $2.20 for FY2012.

We are seeing strong upside magnitude in PPS, with the consensus estimates for current and next quarter as well as FY2012 and FY2013 all moving higher over the past 3 months.

Analysts expect Post to grow earnings by 12-13% by the end of the current fiscal year.

Slow and Steady Wins the Race
Post Properties has been growing steadily for the past two years.  The most recent pullback might offer investors an advantageous entry for a long position.  While capital appreciation has been fairly stable in the stock, investors also have a nice dividend while they ride the oscillations in the market.

PPS is just above its 50-day moving average of $43.29 which can be viewed as near-term support.  Below that is the 200-day moving average of $40.84.  PPS has managed to stay above both of those levels for the past 18 months, falling below them during sharp market pullbacks.

Post outpaced the S&P 500 by 17.53% over the past year.  It tends to have a little more volatility than your average REIT.

This Week's Momentum Zacks Rank Buy Stocks:

Extra Space Storage Inc. (EXR)
Since we last mentioned EXR as a growth and income stock back in June of 2011, it was trading right around $20.  Back then the company had delivered a strong earnings report, noting high occupancy rates and other factors that encouraged them to raise FY2011 guidance. 

Flash forward 8 months and EXR is trading 36% higher and looking more like a momentum stock.  Let’s not forget the fact that Extra Space is still throwing off a 2.05% dividend as a bit of icing on the cake.  The question is whether the strength will continue?

Prestige Brands (PBH)
Just a month ago, we first featured PBH as a value stock that was worth looking into.  In less than 30 days since that report the stock has gained 20% in value, reported a strong quarter and has built quite a bit of momentum behind it.  The stock is currently consolidating near its 52-week high and could be poised for another leg up.  Even with its recent run, Prestige Brands is still fairly valued from an earnings perspective and is still a Zacks Rank #1 Strong Buy.

As the market melts higher and investors look for stability combined with growth, consumer staple stocks like PBH shouldn’t be ignored. Keep in mind that Prestige has a little more pep in its step than a stock like Johnson & Johnson.   

O’Reilly Automotive (ORLY)
It’s not just gear-heads that love this Missouri-based auto parts retailer; Wall Street has been driving this stock higher for the past 8 months straight. 

The good news is that O’Reilly continues to deliver results.  They beat EPS estimates last quarter and improved margins throughout 2011.  New car sales are improving, but consumers are still finding value in their used vehicles and doing minor repairs themselves.  The DIY movement across the US seems to be getting stronger as well.

But O’Reilly doesn’t just cater to individuals; they deliver parts to local shops around the country quickly, efficiently and at competitive prices, which is a large part of their business. 

The question is: can ORLY maintain this momentum into 2012?

Landstar System Inc (LSTR)
We all know UPS loves logistics.  Like UPS, Landstar is a supply chain, logistics and transportation expert for all sorts of commercial needs.  In contrast to UPS, Landstar integrates a vast network of third party freight movers and systems to get parcels from point A to point B quicker, smarter and hopefully cheaper than their competitors.

For growing companies that need to move more of their goods around the world, LSTR provides solutions to execute their customers’ logistical needs via air, rail, road and sea.  They can ship, store, track, economize and manage the entire supply chain from beginning to end.

In a world that wants instant gratification, quick delivery and full automation.  Shipping companies like LSTR may have a very bright future. Their stock is up 44% since October and could regain momentum here if their positive earnings trajectory continues.  

NCR Corporation (NCR)
If you’ve been around the markets long enough, you may remember this company as National Cash Register.  Back in the 1800’s, they were in the business of making quality mechanical cash registers that were cutting edge and helped merchants make transactions more efficient.

In the new age, they have not only evolved to meet the current needs of companies around the world, they have also thrived and created a new image and mission, while sticking to their roots of efficiency. 

For a company that is over 125 years old, NCR may still have some growth and momentum left in it. Recently, they reported stellar financial results for the fourth quarter of 2011. NCR saw revenue of $1.64 billion, which was a 17 percent jump from the fourth quarter of 2010, on both an actual and a constant currency basis.  They reported strong cash flow growth, with operating cash flow of $270 million and free cash flow of $229 million.

NCR may be an old dog with some new tricks yet to come.


Jared A Levy is the Momentum Stock Strategist for He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.



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