A month has gone by since the last earnings report for Apartment Investment Management (AIV - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Apartment Investment Management due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Aimco's Q2 FFO Surpasses, Revenues Miss Estimates
Aimco reported second-quarter 2020 pro-forma FFO of 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. Also, the figure improved 5% from the year-ago quarter’s 60 cents.
Quarterly results reflected higher residential rent and substantial rent collections. However, declining occupancy and same-store revenues remain headwinds.
Notably, rental and other property revenues of $218.8 million in the reported quarter missed the Zacks Consensus Estimate of $219.8 million. Further, the revenue figure comes in 2.4% lower than the prior-year quarter’s $224.2 million.
As of Jul 31, the company collected 97.2% of its total second-quarter residential rents. Moreover, as of the same date, residential rent collection for July totaled 95.8%.
Quarter in Detail
Same-store revenues (before utility reimbursements) slid 1.1% year over year to $180.8 million, while expenses (net of utility reimbursements) edged down 0.4% to $48.7 million. Consequently, same-store NOI declined 1.4% year over year to $132.1 million.
Same-store average daily occupancy declined 140 basis points (bps) year over year to 95.5%. Rental rates on new leases decreased 4.7%, whereas renewal rental rates dropped 0.1% year over year.
Aimco invested $62 million in five redevelopment and development activities during the June-end quarter. These five apartment communities under development or redevelopment have an estimated remaining cost of completion of around $151 million. Aimco also leased 59 redeveloped or newly-developed apartment homes.
In addition, it is revamping its portfolio through property sales, and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-anticipated growth.
Through the moves, Aimco increased its average revenues per apartment home by 2% year over year to $2,254. However, NOI margin declined to 71% from the year-ago quarter’s 72%. The company’s percentage of A, B and C+ home was 53%, 29% and 18%, respectively, in second-quarter 2020.
During the reported quarter, the company sold an apartment community located in Annandale, VA, for $59 million. Net proceeds from the sale were $37 million.
As of Jun 30, 2020, Aimco’s total liquidity of $1.2 billion consisted of cash and restricted cash of $428 million, as well as a borrowing capacity of $793 million under its revolving credit facility.
Further, the company made efforts to increase available credit by placing $609 million of new property loans (generating incremental proceeds of $371 million). In addition, it closed the refinancing of another $80 million in July. With this, Aimco has now eliminated loan maturities for 2020 and will have average annual maturities of $262 million between 2021 and 2024.
In the June-end quarter, the company secured a $350-million bank term loan and used proceeds to repay amounts outstanding on its revolving credit facility.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
At this time, Apartment Investment Management has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Apartment Investment Management has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.