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UDR to Report Q3 Earnings: What's in the Cards for the Stock?

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UDR Inc. (UDR - Free Report) is slated to report third-quarter 2022 earnings on Oct 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 and strong pricing power were major contributing factors.

In the last four quarters, UDR’s earnings met the Zacks Consensus Estimate on each occasion. The graph below depicts the surprise history of the company:

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

Factors to Consider

For the U.S. apartment market, demand remained healthy initially in the third quarter, though normal seasonality returned in September.  

With a geographically diverse portfolio and a superior product mix of A/B quality properties in the urban and suburban markets, UDR is likely to have gained from the healthy demand. Moreover, 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.

With alternative housing options becoming less affordable compared to multifamily, UDR is expected to have experienced healthy demand in the third quarter. Its occupancy level and blended lease rate growth are likely to have remained high in the quarter. However, tougher comps are expected on new lease rate growth in August and September because of strong results a year ago.

Earlier, for the second half of 2022, management expected blended lease rate growth in the 10-12% range. Also, management projected occupancy to remain stable at 97% plus or about flat year over year.

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $381.6 million, indicating a 15.7% year-over-year rise.

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 in the third quarter.

The adoption of technology is also anticipated to have bolstered UDR’s margin during the period under review. In its second-quarter earnings release, UDR projected its third-quarter 2022 FFO as adjusted per share in the range of 58-60 cents.

Before the third-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has remained unchanged at 59 cents in the past month. This suggests year-over-year growth of 15.7%.

Here Is What Our Quantitative Model Predicts:

Our proven model predicts 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 chances of an FFO beat, which is the case here.

UDR currently carries a Zacks Rank of 2 and has an Earnings ESP of +0.57%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks That Warrant a Look

Here are two other stocks from the residential REIT sector — Mid-America Apartment Communities, Inc. (MAA - Free Report) and Camden Property Trust (CPT - Free Report) — that you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter:

Mid-America Apartment Communities, scheduled to report quarterly figures on Oct 26, has an Earnings ESP of +1.31% and a Zacks Rank of 3 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Camden Property Trust, slated to release third-quarter earnings on Oct 27, has an Earnings ESP of +0.39% and a Zacks Rank of 3 at present.

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.

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