We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Equity Residential’s (EQR - Free Report) second-quarter 2022 normalized funds from operations (FFO) per share of 89 cents outpaced the Zacks Consensus Estimate of 85 cents. Rental income of $687 million also exceeded the consensus mark of $670.6 million.
On a year-over-year basis, FFO per share grew 23.6% from 72 cents, while the rental income increased 14.9%.
Results reflect strong physical occupancy and sustained growth in pricing power. This residential REIT also benefited from the favorable real estate tax and payroll expenses. EQR also raised its full-year guidance for same-store revenues, net operating income (“NOI”) and normalized FFO per share. Management noted that robust demand and continued strong cost controls have driven guidance improvements.
Quarter in Detail
Same-store revenues were up 13.6% year over year, reflecting strong physical occupancy and sustained growth in pricing power. The same-store expense increase was limited to 3.1% and reflected the favorable real estate tax and payroll expenses. As a result, same-store NOI surged 19.1% year over year.
The average rental rate increased 13.0% year over year to $2,900 during the quarter ended June, while the physical occupancy expanded 0.6% to 96.7% for the same-store portfolio.
In the second quarter, Equity Residential sold a 354-unit apartment property in New York for $265.7 million at a disposition yield of 3.3%. This produced an unlevered IRR of 6.6%. However, EQR did not acquire any properties in the quarter.
Balance Sheet
Equity Residential exited the second quarter of 2022 with cash and cash equivalents of $45.0 million, down from the $123.8 million recorded at the end of 2021.
The net debt to normalized EBITDAre was 5.01X compared with 5.38X in the previous quarter, while unencumbered NOI as a percentage of the total NOI increased to 88.4% from the 87.5% reported in the prior quarter.
Guidance
For full-year 2022, Equity Residential revised its guidance and now projects normalized FFO per share in the band of $3.48-$3.58, suggesting an 8-cent increase at the midpoint from the prior guidance. The 2022 guidance is ahead of the Zacks Consensus Estimate, which is currently pegged at $3.45.
The company’s full-year guidance incorporates same-store revenue growth of 10.0-11.0%, implying a 1.5% increase at the midpoint from the prior-guided range. Expenses are expected to increase 2.5-3.5%, same as guided earlier. Consequently, NOI is estimated to expand 13.75-14.75%, suggesting a 2.25% uptick at the midpoint from earlier projections. Physical occupancy is expected at 96.5%, same as guided earlier.
For the third quarter of 2022, the company projects normalized FFO per share in the band of 89-93 cents. The Zacks Consensus Estimate for the same is currently pegged at 89 cents.
Essex Property Trust Inc. (ESS - Free Report) reported second-quarter 2022 core FFO per share of $3.68, beating the Zacks Consensus Estimate of $3.55. The figure also surpassed the high-end of the company’s guidance range. The figure also improved 21.1% from the year-ago quarter. The results of Essex Property Trust highlighted better-than-expected operating results and lower property taxes in Washington. Following better-than-expected second-quarter results, ESS also raised the full-year 2022 guidance for the third time this year.
Upcoming Releases
We now look forward to the earnings releases of other residential REITs — AvalonBay Communities, Inc. (AVB - Free Report) and Mid-America Apartment Communities, Inc. (MAA - Free Report) — scheduled for today after the closing bell.
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.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Equity Residential (EQR) Tops Q2 FFO Estimates, Ups 2022 View
Equity Residential’s (EQR - Free Report) second-quarter 2022 normalized funds from operations (FFO) per share of 89 cents outpaced the Zacks Consensus Estimate of 85 cents. Rental income of $687 million also exceeded the consensus mark of $670.6 million.
On a year-over-year basis, FFO per share grew 23.6% from 72 cents, while the rental income increased 14.9%.
Results reflect strong physical occupancy and sustained growth in pricing power. This residential REIT also benefited from the favorable real estate tax and payroll expenses. EQR also raised its full-year guidance for same-store revenues, net operating income (“NOI”) and normalized FFO per share. Management noted that robust demand and continued strong cost controls have driven guidance improvements.
Quarter in Detail
Same-store revenues were up 13.6% year over year, reflecting strong physical occupancy and sustained growth in pricing power. The same-store expense increase was limited to 3.1% and reflected the favorable real estate tax and payroll expenses. As a result, same-store NOI surged 19.1% year over year.
The average rental rate increased 13.0% year over year to $2,900 during the quarter ended June, while the physical occupancy expanded 0.6% to 96.7% for the same-store portfolio.
In the second quarter, Equity Residential sold a 354-unit apartment property in New York for $265.7 million at a disposition yield of 3.3%. This produced an unlevered IRR of 6.6%. However, EQR did not acquire any properties in the quarter.
Balance Sheet
Equity Residential exited the second quarter of 2022 with cash and cash equivalents of $45.0 million, down from the $123.8 million recorded at the end of 2021.
The net debt to normalized EBITDAre was 5.01X compared with 5.38X in the previous quarter, while unencumbered NOI as a percentage of the total NOI increased to 88.4% from the 87.5% reported in the prior quarter.
Guidance
For full-year 2022, Equity Residential revised its guidance and now projects normalized FFO per share in the band of $3.48-$3.58, suggesting an 8-cent increase at the midpoint from the prior guidance. The 2022 guidance is ahead of the Zacks Consensus Estimate, which is currently pegged at $3.45.
The company’s full-year guidance incorporates same-store revenue growth of 10.0-11.0%, implying a 1.5% increase at the midpoint from the prior-guided range. Expenses are expected to increase 2.5-3.5%, same as guided earlier. Consequently, NOI is estimated to expand 13.75-14.75%, suggesting a 2.25% uptick at the midpoint from earlier projections. Physical occupancy is expected at 96.5%, same as guided earlier.
For the third quarter of 2022, the company projects normalized FFO per share in the band of 89-93 cents. The Zacks Consensus Estimate for the same is currently pegged at 89 cents.
Equity Residential currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Equity Residential Price, Consensus and EPS Surprise
Equity Residential price-consensus-eps-surprise-chart | Equity Residential Quote
Performance of a Residential REIT
Essex Property Trust Inc. (ESS - Free Report) reported second-quarter 2022 core FFO per share of $3.68, beating the Zacks Consensus Estimate of $3.55. The figure also surpassed the high-end of the company’s guidance range. The figure also improved 21.1% from the year-ago quarter. The results of Essex Property Trust highlighted better-than-expected operating results and lower property taxes in Washington. Following better-than-expected second-quarter results, ESS also raised the full-year 2022 guidance for the third time this year.
Upcoming Releases
We now look forward to the earnings releases of other residential REITs — AvalonBay Communities, Inc. (AVB - Free Report) and Mid-America Apartment Communities, Inc. (MAA - Free Report) — scheduled for today after the closing bell.
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.