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Mid-America Apartment (MAA) Shares Up 6.1% QTD: Here's Why
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Shares of Mid-America Apartment Communities (MAA - Free Report) — commonly known as MAA — have risen 6.1% so far in the quarter, outperforming the industry’s increase of just 0.4%.
Image Source: Zacks Investment Research
This residential REIT is engaged in owning, managing, acquiring, developing and redeveloping quality apartment communities, mainly in the Southeast, Southwest and Mid-Atlantic regions of the United States. MAA recently announced a common stock cash dividend of $1.40 per share, marking a 12% hike over the prior payment and the 13th consecutive annual increase in the company’s dividend.
MAA is also experiencing a favorable estimate revision trend. Estimates for fourth-quarter and current-year funds from operations (FFO) per share have moved north over the past month to $2.28 and $8.46, respectively.
There are several other factors behind the surge in the stock price and upward estimate revisions for FFO per share. Let us delve deeper.
MAA’s diversified Sunbelt portfolio was less severely affected by the pandemic and the economic shutdown. Rather, the pandemic has accelerated employment shifts and a population inflow into the company’s markets as renters seek more business-friendly, lower-taxed and low-density cities. These favorable longer-term secular dynamic trends are increasing the desirability of its markets.
Also, the high pricing of single-family ownership units continues to drive the demand for rental apartments. Amid this, MAA is well-poised to capture recovery in demand and leasing compared to expensive coastal markets. We expect strong rent growth and stable occupancy to drive revenues.
This Sunbelt-focused apartment REIT opts for opportunistic investments to maintain the right product mix and raise the number of apartment communities in dynamic markets. MAA projects development investments of $200 to $250 million and acquisitions of $213 million for 2022. Such efforts are likely to improve portfolio quality and propel the company’s growth over the long term.
MAA continues to implement its three internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs will help the company capture the upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base.
The company completed 2,305 interior unit upgrades and installed 652 Smart Home packages in the third quarter. In 2022, the company plans to complete more than 6,000 interior unit upgrades and approximately 23,000 Smart Home packages. By the end of the year, management projects the total number of smart units to reach 70,000.
For its repositioning program, leases have been repriced at the first eight properties in the program. Meanwhile, the company has another eight projects, which are presently in various stages of construction and unit repricing.
Along with the healthy operating fundamentals of Sunbelt markets and a robust development pipeline, the prospects of MAA’s redevelopment program and progress in technology measures are likely to drive margin expansion.
MAA’s current cash flow growth is projected at 39.17% compared with the 14.86% growth projected for the industry. Moreover, this REIT’s trailing 12-month return on equity (ROE) highlights its growth potential. The company’s ROE of 10.60% compares favorably with the industry’s 4.78%, reflecting that MAA is more efficient in using shareholders’ funds than its peers.
However, inflationary pressures and supply-chain woes are expected to push property operating expenses higher. Also, rate hikes add to its woes.
Some better-ranked stocks from the REIT sector are VICI Properties Inc. (VICI - Free Report) and Lamar Advertising Company (LAMR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for VICI Properties’ 2022 FFO per share has moved 3.2% north to $1.92 over the past month.
The Zacks Consensus Estimate for Lamar Advertising Company’s ongoing year’s FFO per share has been raised 1.4% over the past two months to $7.34.
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.
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Mid-America Apartment (MAA) Shares Up 6.1% QTD: Here's Why
Shares of Mid-America Apartment Communities (MAA - Free Report) — commonly known as MAA — have risen 6.1% so far in the quarter, outperforming the industry’s increase of just 0.4%.
Image Source: Zacks Investment Research
This residential REIT is engaged in owning, managing, acquiring, developing and redeveloping quality apartment communities, mainly in the Southeast, Southwest and Mid-Atlantic regions of the United States. MAA recently announced a common stock cash dividend of $1.40 per share, marking a 12% hike over the prior payment and the 13th consecutive annual increase in the company’s dividend.
MAA is also experiencing a favorable estimate revision trend. Estimates for fourth-quarter and current-year funds from operations (FFO) per share have moved north over the past month to $2.28 and $8.46, respectively.
There are several other factors behind the surge in the stock price and upward estimate revisions for FFO per share. Let us delve deeper.
MAA’s diversified Sunbelt portfolio was less severely affected by the pandemic and the economic shutdown. Rather, the pandemic has accelerated employment shifts and a population inflow into the company’s markets as renters seek more business-friendly, lower-taxed and low-density cities. These favorable longer-term secular dynamic trends are increasing the desirability of its markets.
Also, the high pricing of single-family ownership units continues to drive the demand for rental apartments. Amid this, MAA is well-poised to capture recovery in demand and leasing compared to expensive coastal markets. We expect strong rent growth and stable occupancy to drive revenues.
This Sunbelt-focused apartment REIT opts for opportunistic investments to maintain the right product mix and raise the number of apartment communities in dynamic markets. MAA projects development investments of $200 to $250 million and acquisitions of $213 million for 2022. Such efforts are likely to improve portfolio quality and propel the company’s growth over the long term.
MAA continues to implement its three internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs will help the company capture the upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base.
The company completed 2,305 interior unit upgrades and installed 652 Smart Home packages in the third quarter. In 2022, the company plans to complete more than 6,000 interior unit upgrades and approximately 23,000 Smart Home packages. By the end of the year, management projects the total number of smart units to reach 70,000.
For its repositioning program, leases have been repriced at the first eight properties in the program. Meanwhile, the company has another eight projects, which are presently in various stages of construction and unit repricing.
Along with the healthy operating fundamentals of Sunbelt markets and a robust development pipeline, the prospects of MAA’s redevelopment program and progress in technology measures are likely to drive margin expansion.
MAA’s current cash flow growth is projected at 39.17% compared with the 14.86% growth projected for the industry. Moreover, this REIT’s trailing 12-month return on equity (ROE) highlights its growth potential. The company’s ROE of 10.60% compares favorably with the industry’s 4.78%, reflecting that MAA is more efficient in using shareholders’ funds than its peers.
However, inflationary pressures and supply-chain woes are expected to push property operating expenses higher. Also, rate hikes add to its woes.
MAA currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties Inc. (VICI - Free Report) and Lamar Advertising Company (LAMR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for VICI Properties’ 2022 FFO per share has moved 3.2% north to $1.92 over the past month.
The Zacks Consensus Estimate for Lamar Advertising Company’s ongoing year’s FFO per share has been raised 1.4% over the past two months to $7.34.
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.