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What's in Store for Equity Residential's (EQR) Q2 Earnings?
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Equity Residential (EQR - Free Report) is slated to report second-quarter 2020 results on Jul 28, after market close. The company’s results will likely reflect year-over-year declines in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Chicago, IL-based residential real estate investment trust (REIT) delivered an in-line performance in terms of FFO per share.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on three occasions and met in the other, the average surprise being 1.71%. The graph below depicts this surprise history:
Let’s see how things have shaped up for Equity Residential prior to this announcement.
Key Factors
The prime leasing season for the U.S. apartment market did not have a favorable start this time. This is because the coronavirus crisis has impacted the economy and substantial job cuts in the beginning of the April-June quarter affected leasing activity.
Per the latest report from real estate technology and analytics firm RealPage , the June-end quarter witnessed demand for just 33,966 units across the country’s 150 largest markets. This marks roughly one-fourth of the average apartment product absorption realized in the second quarter in the past five years.
Majority of the demand was seen in June, as leasing activity in several locations were limited in the previous months. Moreover, the Sun Belt markets topped the second-quarter apartment demand. However, a number of gateway markets suffered net move-outs during the to-be-reported quarter, and urban core neighborhoods struggled the most.
Equity Residential, which focuses on rental apartment properties in urban and high-density suburban communities, too had witnessed significant declines in leasing activity earlier, with the company’s markets becoming subject to shelter-in-place orders amid the pandemic. Traffic, initial leads and applications slumped 50% or more in the third week of March, compared with the prior-year period.
However, in the Jun 1 operational update, the company noted that it is witnessing a recovery in demand with initial leads, traffic and applications now, getting back in line with the same period last year. Equity Residential also noted that it has witnessed improvements in physical occupancy, reaching 94.9% quarter to date, with increased activities, while residential cash collections were solid in May and consistent with April.
Nevertheless, for its same-store operating properties, the quarter-to-date new lease change was down 4.8% compared with the first-quarter decline of 0.7%, while renewal rate came in at 1.5% down from the prior quarter’s 4.2%. Blended rate too was -0.7% as against the first quarter’s 1.8%.
The Zacks Consensus Estimate for the company’s quarterly revenues is pinned at $656.7 million, indicating a 1.9% decline year on year. Physical occupancy rate is expected to be around 95%.
Prior to the second-quarter earnings release, analysts seem to have become slightly optimistic about the company’s prospects as the Zacks Consensus Estimate for the April-June quarter FFO per share moved two cents north to 83 cents over the past week. However, it suggests a year-over year decline of 3.5%.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Equity Residential this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Equity Residential currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of +0.96%.
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:
Iron Mountain Incorporated (IRM - Free Report) , slated to release second-quarter earnings on Aug 6, has an Earnings ESP of +4.76% and carries a Zacks Rank of 3 at present.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
What's in Store for Equity Residential's (EQR) Q2 Earnings?
Equity Residential (EQR - Free Report) is slated to report second-quarter 2020 results on Jul 28, after market close. The company’s results will likely reflect year-over-year declines in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Chicago, IL-based residential real estate investment trust (REIT) delivered an in-line performance in terms of FFO per share.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on three occasions and met in the other, the average surprise being 1.71%. The graph below depicts this surprise history:
Equity Residential Price and EPS Surprise
Equity Residential price-eps-surprise | Equity Residential Quote
Let’s see how things have shaped up for Equity Residential prior to this announcement.
Key Factors
The prime leasing season for the U.S. apartment market did not have a favorable start this time. This is because the coronavirus crisis has impacted the economy and substantial job cuts in the beginning of the April-June quarter affected leasing activity.
Per the latest report from real estate technology and analytics firm RealPage , the June-end quarter witnessed demand for just 33,966 units across the country’s 150 largest markets. This marks roughly one-fourth of the average apartment product absorption realized in the second quarter in the past five years.
Majority of the demand was seen in June, as leasing activity in several locations were limited in the previous months. Moreover, the Sun Belt markets topped the second-quarter apartment demand. However, a number of gateway markets suffered net move-outs during the to-be-reported quarter, and urban core neighborhoods struggled the most.
Equity Residential, which focuses on rental apartment properties in urban and high-density suburban communities, too had witnessed significant declines in leasing activity earlier, with the company’s markets becoming subject to shelter-in-place orders amid the pandemic. Traffic, initial leads and applications slumped 50% or more in the third week of March, compared with the prior-year period.
However, in the Jun 1 operational update, the company noted that it is witnessing a recovery in demand with initial leads, traffic and applications now, getting back in line with the same period last year. Equity Residential also noted that it has witnessed improvements in physical occupancy, reaching 94.9% quarter to date, with increased activities, while residential cash collections were solid in May and consistent with April.
Nevertheless, for its same-store operating properties, the quarter-to-date new lease change was down 4.8% compared with the first-quarter decline of 0.7%, while renewal rate came in at 1.5% down from the prior quarter’s 4.2%. Blended rate too was -0.7% as against the first quarter’s 1.8%.
The Zacks Consensus Estimate for the company’s quarterly revenues is pinned at $656.7 million, indicating a 1.9% decline year on year. Physical occupancy rate is expected to be around 95%.
Prior to the second-quarter earnings release, analysts seem to have become slightly optimistic about the company’s prospects as the Zacks Consensus Estimate for the April-June quarter FFO per share moved two cents north to 83 cents over the past week. However, it suggests a year-over year decline of 3.5%.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Equity Residential this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Equity Residential currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of +0.96%.
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:
SBA Communications Corporation (SBAC - Free Report) , set to report quarterly numbers on Aug 3, currently has an Earnings ESP of +4.48% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Iron Mountain Incorporated (IRM - Free Report) , slated to release second-quarter earnings on Aug 6, has an Earnings ESP of +4.76% and carries a Zacks Rank of 3 at present.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>