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Is a Beat in Store for Equity Residential's (EQR) Q1 Earnings?
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Equity Residential (EQR - Free Report) is slated to report first-quarter 2021 results on Apr 27, after the closing bell. 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) reported a surprise of 2.7% in terms of FFO per share. Results reflected better-than-anticipated rental income in the quarter.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on two occasions and met in the other and missed in another, the average surprise being 0.05%. The graph below depicts this surprise history:
Let’s see how things have shaped up for Equity Residential prior to this announcement.
Key Factors
For the U.S. apartment market, the first quarter, which typically remains a slow leasing period in other years, appeared to be solid one this year, with impressive demand for rental units. Thanks to employment growth that spurs household formation and housing absorption, demand for 52,661 apartments were registered across the country’s 150 largest metros during the quarter, per a report from the real estate technology and analytics firm RealPage .
This tally is well ahead of the year-ago volume of 29,657 units. Not just that. This year’s first-quarter demand is more than double the average first-quarter demand of about 25,200 units witnessed in the past 10 years. Considering that the first quarter comprises the cold weather months that affect leasing activity, this year’s performance is definitely a notable one. However, this healthy demand has been the most noticeable in the Sun Belt metros. Demand also remained impressive in the sub-urban ones though situations still remain turbulent in some of the gateway markets.
The occupancy level was encouraging in March, though the rent results have been mixed. Particularly, March occupancy came in at 95.5% in the United States’ 150 largest metros. This suggests stability and the occupancy level has been somewhere between 95.2% and 95.8% since late 2019. Considering that the world has been battling a pandemic in the meantime, this stability is particularly encouraging.
Nonetheless, considering the annual rent change, it is important to note that with some of the largest markets having suffered significant declines, the national shift in effective asking rents is still a tad negative at -0.7%. Specifically, San Francisco, San Jose and New York saw significant annual declines in effective asking rents. Nevertheless, the U.S. apartment rents moved up in the first three months of 2021, with a 0.2% increase in January and 0.6% in February, prior to the 0.7% rise in March.
Equity Residential is expected to have benefited from its sub-urban portfolio exposure. It has a healthy balance sheet, and is banking on technology, scale and organizational capabilities to drive growth.
In its earlier-released operating update, the company had noted that it continued to witness “good demand for its apartment units” in February. This is highlighted by the sustained trend of move-ins surpassing move outs, in turn translating into improvement in physical occupancy.
Particularly, as of the end of February, the company saw physical occupancy of 95.3%, up from 95.1% at January end and 94.4% at December end. Renewals also improved in February, with 54% of residents renewing by the month compared with 51% by January.
The company also noted that it is presently witnessing improvement in rates and reductions in leasing concession usage. Blended rate for February was a negative 11.5% compared with 14.5% in January and 13.9% in December.
Amid these, the Zacks Consensus Estimate for the company’s quarterly revenues is pinned at $586.8 million, indicating a 14% decline year on year. The consensus estimate for total same-store revenues is currently pegged at $588 million. Physical occupancy rate is expected to have been around 95% in the first quarter, up from the prior quarter's nearly 94%.
However, amid extended work-from-home announcements, there is an adverse impact on demand for its urban properties, and this portfolio might have continued to see the brunt in terms of rental rates and physical occupancy.
Also, the struggle to lure renters is likely to have continued in the first quarter, as supply volumes remained elevated. In the March-end quarter, though demand was strong, apartment absorption still lagged the property completion tally, with new supply aggregating 84,794 units.
Moreover, prior to the first-quarter earnings release, there is lack of any solid catalyst for being optimistic about the company’s business activities and prospects. The Zacks Consensus Estimate for the first-quarter FFO per share has been revised a cent below to 68 cents over the past months. The figure also suggests a year-over-year decrease of 21.8%.
For first-quarter 2021, the company projects normalized FFO per share at 65-69 cents.
Here is what our quantitative model predicts:
Our proven model predicts 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 chances of a FFO beat. 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 #3 and has an Earnings ESP of +0.81%.
Other Stocks That Warrant a Look
Here are a few other 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:
CubeSmart (CUBE - Free Report) , slated to release quarterly numbers on Apr 29, has an Earnings ESP of +3.14% and 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.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Is a Beat in Store for Equity Residential's (EQR) Q1 Earnings?
Equity Residential (EQR - Free Report) is slated to report first-quarter 2021 results on Apr 27, after the closing bell. 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) reported a surprise of 2.7% in terms of FFO per share. Results reflected better-than-anticipated rental income in the quarter.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on two occasions and met in the other and missed in another, the average surprise being 0.05%. 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
For the U.S. apartment market, the first quarter, which typically remains a slow leasing period in other years, appeared to be solid one this year, with impressive demand for rental units. Thanks to employment growth that spurs household formation and housing absorption, demand for 52,661 apartments were registered across the country’s 150 largest metros during the quarter, per a report from the real estate technology and analytics firm RealPage .
This tally is well ahead of the year-ago volume of 29,657 units. Not just that. This year’s first-quarter demand is more than double the average first-quarter demand of about 25,200 units witnessed in the past 10 years. Considering that the first quarter comprises the cold weather months that affect leasing activity, this year’s performance is definitely a notable one. However, this healthy demand has been the most noticeable in the Sun Belt metros. Demand also remained impressive in the sub-urban ones though situations still remain turbulent in some of the gateway markets.
The occupancy level was encouraging in March, though the rent results have been mixed. Particularly, March occupancy came in at 95.5% in the United States’ 150 largest metros. This suggests stability and the occupancy level has been somewhere between 95.2% and 95.8% since late 2019. Considering that the world has been battling a pandemic in the meantime, this stability is particularly encouraging.
Nonetheless, considering the annual rent change, it is important to note that with some of the largest markets having suffered significant declines, the national shift in effective asking rents is still a tad negative at -0.7%. Specifically, San Francisco, San Jose and New York saw significant annual declines in effective asking rents. Nevertheless, the U.S. apartment rents moved up in the first three months of 2021, with a 0.2% increase in January and 0.6% in February, prior to the 0.7% rise in March.
Equity Residential is expected to have benefited from its sub-urban portfolio exposure. It has a healthy balance sheet, and is banking on technology, scale and organizational capabilities to drive growth.
In its earlier-released operating update, the company had noted that it continued to witness “good demand for its apartment units” in February. This is highlighted by the sustained trend of move-ins surpassing move outs, in turn translating into improvement in physical occupancy.
Particularly, as of the end of February, the company saw physical occupancy of 95.3%, up from 95.1% at January end and 94.4% at December end. Renewals also improved in February, with 54% of residents renewing by the month compared with 51% by January.
The company also noted that it is presently witnessing improvement in rates and reductions in leasing concession usage. Blended rate for February was a negative 11.5% compared with 14.5% in January and 13.9% in December.
Amid these, the Zacks Consensus Estimate for the company’s quarterly revenues is pinned at $586.8 million, indicating a 14% decline year on year. The consensus estimate for total same-store revenues is currently pegged at $588 million. Physical occupancy rate is expected to have been around 95% in the first quarter, up from the prior quarter's nearly 94%.
However, amid extended work-from-home announcements, there is an adverse impact on demand for its urban properties, and this portfolio might have continued to see the brunt in terms of rental rates and physical occupancy.
Also, the struggle to lure renters is likely to have continued in the first quarter, as supply volumes remained elevated. In the March-end quarter, though demand was strong, apartment absorption still lagged the property completion tally, with new supply aggregating 84,794 units.
Moreover, prior to the first-quarter earnings release, there is lack of any solid catalyst for being optimistic about the company’s business activities and prospects. The Zacks Consensus Estimate for the first-quarter FFO per share has been revised a cent below to 68 cents over the past months. The figure also suggests a year-over-year decrease of 21.8%.
For first-quarter 2021, the company projects normalized FFO per share at 65-69 cents.
Here is what our quantitative model predicts:
Our proven model predicts 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 chances of a FFO beat. 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 #3 and has an Earnings ESP of +0.81%.
Other Stocks That Warrant a Look
Here are a few other 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:
Digital Realty Trust, Inc. (DLR - Free Report) , scheduled to report quarterly numbers on Apr 29, currently has an Earnings ESP of +1.06% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CubeSmart (CUBE - Free Report) , slated to release quarterly numbers on Apr 29, has an Earnings ESP of +3.14% and 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.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
AccessZacks Top 10 Stocks for 2021 today >>