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What Awaits Mid-America Apartment (MAA) This Earnings Season?

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Mid-America Apartment Communities, Inc. (MAA - Free Report) — commonly known as MAA — is slated to report fourth-quarter and full-year 2022 results on Feb 1 after market close. MAA’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.

The Germantown, TN-based residential real estate investment trust (REIT) delivered a surprise of 4.78% in terms of FFO per share in the last reported quarter. This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio.

MAA has a decent surprise history. Over the trailing four quarters, MAA surpassed the Zacks Consensus Estimate on all occasions, the average being 2.50%. This is depicted in the chart below:

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

Factors to Consider

For the U.S. apartment market, low consumer confidence and high inflation have taken a toll, with net demand for apartments ending in negative territory for calendar 2022, per a report from the real estate technology and analytics firm RealPage. Despite solid job growth and wage gains, there was weak demand for all types of housing.

Amid this soft demand, new-lease apartment rents fell in December for the fourth consecutive month, declining another 0.4%. The cumulative rent drop was around 1.6% since September. Also, the national apartment vacancy surged from a record seasonal low of 2.5% one year ago to 5.0% in December 2022.

However, MAA’s diversified Sunbelt portfolio is well-poised to benefit from the favorable fundamentals of this market. The pandemic 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.

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. In the fourth quarter, MAA is expected to have experienced strong rent growth and stable occupancy, thereby driving revenue growth.

MAA also continues to implement its three internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs are expected to have helped the company capture the upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base.

The Zacks Consensus Estimate for quarterly revenues is pegged at $525.5 million, suggesting a 13.36% rise from the year-ago quarter’s reported figure. Same-store revenues are projected at $517.65 million, indicating an increase from the $495.38 million reported in the prior quarter and $444.39 million in the year-ago period.

The consensus estimate for physical occupancy is presently pegged at 95.7% for the fourth quarter, slightly lower than 95.8% in the prior quarter.

MAA projects the fourth-quarter 2022 core FFO per share in the band of $2.19-$2.35, with $2.27 at the midpoint.

Before the fourth-quarter earnings release, the company’s activities were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised a cent upward to $2.28 in the past month. This suggests year-over-year growth of 20%.

This residential REIT estimates 2022 core FFO per share in the range of $8.37-$8.53, with a midpoint of $8.45. This is backed by a projection for same-store property revenue growth of 13.0-14.0%, same-store property operating expense growth between 7.0% and 7.5% and same-store NOI growth anticipated between 16.0% and 18.0%.

For the full year, the Zacks Consensus Estimate for core FFO per share is pegged at $8.46. The figure indicates a 20.7% increase year over year on 13.5% year-over-year growth in revenues to $2.02 billion.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for MAA 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 not the case here.

MAA currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.06%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are three stocks from the broader REIT sector — First Industrial Realty Trust, Inc. (FR - Free Report) , STAG Industrial, Inc. (STAG - Free Report) and Gladstone Commercial Corporation (GOOD - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

First Industrial Realty Trust is slated to report quarterly numbers on Feb 8. FR has an Earnings ESP of +7.65% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.

STAG Industrial, scheduled to report quarterly numbers on Feb 15, has an Earnings ESP of +2.89% and carries a Zacks Rank of 2.

Gladstone Commercial Corporation is slated to report quarterly numbers on Feb 22. GOOD has an Earnings ESP of +5.13% and sports a Zacks Rank of 1 presently.

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

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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