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What's in Store for Mid-America Apartment's (MAA) Q2 Earnings?

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Mid-America Apartment Communities, Inc. (MAA - Free Report) — commonly known as MAA — is slated to report second-quarter 2021 results on Jul 28, after market close. The company’s results will likely reflect year-over-year growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Germantown, TN-based residential real estate investment trust (REIT) reported a surprise of 1.86% in terms of FFO per share. The quarterly results were driven by an increase in average effective rent per unit for the same-store portfolio.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions, the average beat being 2.08%. This is depicted in the chart below:

MidAmerica Apartment Communities, Inc. Price and EPS Surprise MidAmerica Apartment Communities, Inc. Price and EPS Surprise

MidAmerica Apartment Communities, Inc. price-eps-surprise | MidAmerica Apartment Communities, Inc. Quote

Let’s see how things have shaped up for the announcement.

Factors to Consider

For the U.S. apartment market, the second quarter appeared to be robust this year, with renter demand soaring significantly. The number of occupied apartments in the nation’s 150 largest metros climbed 219,909 units, per a report from the real estate technology and analytics firm RealPage, aided by acceleration in employment growth that drives household formation and housing absorption. This not only marked a significant increase from second-quarter 2020 when demand for apartments was limited to around 33,000 units, given the nationwide lockdown, but is also the biggest quarterly upsurge observed in the RealPage, Inc. database. Surge in home prices and fewer for-sale product availability in the market, which are making it difficult for conversion of renters to homebuyers, are other tailwinds.

The Sun Belt metros continue to see healthy demand that have already proved their resilience amid the coronavirus mayhem. However, the gateway markets too registered solid demand with considerable absorption, after witnessing a turbulent environment last year that hurt fundamentals, with job losses and population declines, and a flexible working environment.

The current favorable environment is boosting occupancy levels and in turn, pushing up rents. Per a report from RealPage, occupancy is in line with the early 2000s all-time highs, with effective asking rents increasing 2% this June, pushing up prices 6.3% year over year.

MAA’s Sun Belt portfolio is likely to have benefited amid these. The pandemic has accelerated employment shifts and population inflow into the company’s markets, thereby enhancing the desirability of its markets. Healthy demand for MAA’s well-positioned Sunbelt properties is anticipated to have positively impacted the company during the second quarter.

The residential REIT has been focusing on redevelopment initiatives and smart-home installations.  In the to-be-reported quarter, the company is likely to have continued to enjoy higher rents at its redeveloped properties.

Per management’s June investor conference presentation, average blended pricing growth for leases compared with the prior lease at the company’s same-store portfolio improved to 6.9% in May, from the 2.7% reported in the first quarter. Also, as of May 2021, average physical occupancy for the same-store portfolio was 96.4%, expanding 70 basis points from the previous quarter.

The company expects a favorable year-on-year revenue comparison for the second quarter as the prior-year quarter results were affected by larger-than-normal collection write-offs and lower fee revenues.

The Zacks Consensus Estimate for quarterly revenues is pegged at $429.2 million, suggesting a year-over-year rise of 3.9%. Same-store revenues are projected at $413 million, indicating a 5.9% increase from the prior-year quarter.

During the second quarter, the company is likely to have enjoyed a robust balance-sheet position, with low leverage and ample availability under its revolving credit facility.

MAA expects core FFO for the second quarter in the range of $1.53-$1.69 per share.

Prior to the second-quarter earnings release, the Zacks Consensus Estimate for the quarterly FFO per share has been revised marginally upward to $1.64 over the past month. This calls for year-over year growth of 3.1%.

Here is what our quantitative model predicts:

MAA has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of a FFO beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

MAA currently carries a Zacks Rank #3 and has an Earnings ESP of +2.65%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks That Warrant a Look

Here are some other stocks in the REIT sector you may want to consider, as our model shows that these have the right combination of elements to report a surprise for the second quarter:

Equity Residential (EQR - Free Report) , scheduled to report second-quarter earnings on Jul 27, currently has an Earnings ESP of +1.43% and carries a Zacks Rank of 2 (Buy).

UDR Inc. (UDR - Free Report) , slated to announce second-quarter 2021 earnings on Jul 28, currently carries a Zacks Rank of #3 and has an Earnings ESP of +0.91%.

Essex Property Trust, Inc. (ESS - Free Report) , set to release quarterly numbers on Jul 29, has an Earnings ESP of +0.29% 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.