It has been about a month since the last earnings report for Mid-America Apartment Communities (
MAA Quick Quote MAA - Free Report) . Shares have lost about 1.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mid-America Apartment Communities 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 catalysts.
Mid-America Apartment Tops on Q4 FFO, Issues '21 View
MAA reported fourth-quarter 2020 core FFO per share of $1.65, surpassing the Zacks Consensus Estimate of $1.64. However, the reported figure marginally declined from the year-ago figure of $1.66.
The residential REIT’s quarterly results were driven by an increase in average effective rent per unit and occupancy for the same-store portfolio. Rental and other property revenues were $423.7 million during the December-end quarter, outpacing the Zacks Consensus Estimate of $422.3 million. The reported figure was also 1.7% higher than the year-ago quarter’s $416.8 million. Per management, “We continue to capture strong demand for apartment housing across our Sunbelt markets. Improving job growth and in-migration trends, that are higher than national trends, continue to support solid occupancy and positive rent growth in our portfolio. We carry good momentum into 2021 and continue to believe that we are early in a multiyear recovery cycle.” The company stated that as of Feb 1, 2021, rent cash receipts for the same-store portfolio aggregated 99.2% of billed residential rent for the fourth quarter. For 2020, the company reported core FFO per share of $6.43, up 2.7% from $6.26 in the prior year and outpaced the Zacks Consensus Estimate of $6.42. Also, rental and other property revenues of $1.67 billion improved 2.3% year over year. However, for the year ended 2020, average physical occupancy for the same-store portfolio was 95.6%, contracting 30 bps year over year. Quarter in Detail
The same-store portfolio’s revenues grew 1.8% on a year-over-year rise of 1.3% in average effective rent per unit. However, same-store portfolio property operating expenses flared up 6.9%, resulting in a year-over-year decline of 0.9% in same-store NOI. Moreover, average physical occupancy for the same-store portfolio for the fourth quarter was 95.7%, expanding 10 bps year over year.
During the fourth quarter, lease pricing at the company’s same-store portfolio for both new and renewing leases compared with the prior lease grew 0.8% on a combined basis. As of Dec 31, 2020, unencumbered NOI was 93.4% of total NOI. As of Dec 31, 2020, MAA held cash and cash equivalents of $25.2 million, up from $20.5 million as of Dec 31, 2019. Additionally, as of the same date, total debt outstanding was $4.6 billion. Furthermore, as of the same date, $849.8 million of combined cash and capacity were available under its unsecured revolving credit facility, net of commercial paper borrowings. Portfolio Activity
During the October-December period, MAA closed the pre-purchase of a 317-unit multifamily apartment community development — Novel Val Vista —in Phoenix, AZ, and started development activities at the property.
During the fourth quarter, the company redeveloped 911 units. As of Dec 30, 2020, it had eight development communities under construction, with a projected average stabilized NOI yield of 6.1%. Outlook
MAA projects 2021 core FFO per share at $6.30-$6.60.
For its same-store communities, it forecasts property revenue growth of 1-3%, while property operating expense growth is projected at 3-5%. Moreover, the company anticipates NOI growth of 0-2% and average physical occupancy of 95.25%-95.75%. Also, 2021 multifamily disposition volume is projected to be $200-$250 million. For first-quarter 2021, core FFO per share is projected to be $1.5-$1.67 or $1.59 at the midpoint. How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
At this time, Mid-America Apartment Communities has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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, Mid-America Apartment Communities has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.