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UDR to Report Q1 Earnings: What's in the Cards for the Stock?

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UDR Inc. (UDR - Free Report) is slated to report first-quarter 2022 earnings on Apr 26 after market close. Results are likely to reflect growth in revenues and funds from operations (FFO) per share from the respective year-ago reported figures.

In the last reported quarter, the FFO as adjusted per share of this Denver, CO-based residential real estate investment trust (REIT) came in line with the Zacks Consensus Estimate. There was an increase in revenues from rental income, fueling the quarter’s top line. Decent operating trends, strong pricing power and accretive transactions were also witnessed.

In the last four quarters, UDR’s earnings met the Zacks Consensus Estimate on three occasions while missing the mark in the remaining one, the average negative surprise being 0.52%.

Let’s see how things have shaped up before this announcement.

Factors to Consider

For the U.S. apartment market, the first quarter — typically a slow leasing period in other years — appears to be a solid one this year, with impressive demand for rental units, due to the pandemic that disrupted seasonal behavior.

Per a report from the real estate technology and analytics firm, RealPage, the U.S. apartment market witnessed robust demand, with net demand for market-rate apartments aggregating a whopping 712,899 units nationally in the year ending the first quarter of 2022. This not only marks an 8% increase from the previous high a quarter earlier but also is 76% higher than the pre-pandemic-era highest established back in 2000. There is strong demand from young adults who are gaining from tight labor market conditions and record wage growth.

As a result of the high demand, the apartment occupancy inched up 0.1 percentage point to 97.6% instead of seasonal cooling in the first quarter. Rent growth reached another all-time high, with the new lease effective asking rents increasing 15.2% year over year through March.

UDR is likely to have gained from this improving trend with a geographically diverse portfolio and a superior product-mix of A/B quality properties in the urban and suburban markets. UDR’s portfolio comprises properties throughout the United States, including the coastal and Sunbelt locations. This strategy of maintaining a diversified portfolio across various geographies and price points limits volatility and concentration risks and helps UDR generate steady operating cash flows.

UDR enjoys a decent balance sheet position and banks on technological moves and process enhancements to fuel growth. UDR focuses on enhancing cost control through its Next Generation Operating Platform. Such efforts to find efficiencies throughout its operating platform are likely to have boosted workforce productivity and residents’ experiences during the first quarter. The adoption of technology is also anticipated to have bolstered UDR’s margin during the period under review.

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $353.8 million, indicating an 18% year-over-year rise.

In its fourth-quarter earnings release, UDR projected its first-quarter 2022 FFO as adjusted per share in the range of 53-55 cents.

Before the first-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for quarterly FFO per share has remained unchanged at 55 cents in the past month. However, this suggests year-over-year growth of 17.02%.

However, significant exposure to the challenged urban residential assets where the flexible working environment is still denting demand might have hurt UDR’s rental rates and occupancy levels. An oversupply in its urban markets and pandemic-related regulatory challenges also add to its woes.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for UDR 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 an FFO beat. However, that’s not the case here.

Earnings ESP: UDR has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: UDR currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks That Warrant a Look

Here are three stocks from the residential REIT sector — AvalonBay Communities, Inc. (AVB - Free Report) , Camden Property Trust (CPT - Free Report) and American Homes 4 Rent (AMH - Free Report) — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter:

AvalonBay Communities, slated to release first-quarter earnings on Apr 27, has an Earnings ESP of +0.46% and a Zacks Rank of 3 at present.

Camden Property Trust, scheduled to report quarterly figures on Apr 28, has an Earnings ESP of +1.25 % and a Zacks Rank of 2 currently.

American Homes 4 Rent, slated to report quarterly numbers on May 5, has an Earnings ESP of +0.76% and carries a Zacks Rank of 3.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.