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Can UDR Capitalize on the Rebound in the U.S. Apartment Market?

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UDR Inc. (UDR - Free Report) , a premier multifamily real estate investment trust (REIT), is set to announce its first-quarter 2023 earnings results on Apr 26 after market close. The company, known for owning, operating, acquiring and developing high-quality apartment communities across the United States, has been a strong choice for investors seeking exposure to the flourishing multifamily real estate sector.

In this preview, we will discuss UDR's recent performance, the resurgence in the U.S. apartment market, and what investors can expect from UDR's first-quarter 2023 earnings.

Q4 2022 Recap

In the last reported quarter, this Denver, CO-based residential REIT came up with funds from operations (FFO) as adjusted per share of 61 cents, in line with the consensus mark. The quarterly results reflected a year-over-year rise in revenues, driven by healthy operating trends and past accretive external growth investments. However, higher same-store expenses were a headwind.

In the last four quarters, UDR’s FFO as adjusted per share surpassed the Zacks Consensus Estimate on one occasion and met the same on the other three, the average surprise being 0.42%. The graph below depicts the surprise history of the company:

U.S. Apartment Market Rebound

First-quarter data from RealPage Market Analytics shows that the U.S. apartment market has experienced a rebound in net apartment demand, ending a streak of three consecutive quarters of negative absorption. The market added 19,243 net new renters in the quarter, signaling a return to positive territory. Occupancy rates continued to slide but at a much lesser degree than before, coming in at 94.7% in March, matching the pre-pandemic decade average.

In March, same-store effective asking rents for new lease signers increased 0.3%, with effective asking rents up 3.9% year over year, marking the first time below 4% since April 2021. These trends suggest that somewhat normal seasonality is returning to the market after a three-year absence due to the pandemic.

Q1 2023 Expectations for UDR

With the resurgence in the U.S. apartment market, it's likely that UDR will capitalize on positive trends to deliver a strong performance in the first quarter of 2023. The rebound in net apartment demand is likely to have resulted in healthy occupancy rates and rental growth, driving revenues for the multifamily REIT.

Per its first-quarter 2023 Investor Presentation, UDR’s blended lease rate growth accelerated from December to February. This supported its first-quarter 2023 blended lease rate growth expectation of 3.3% to 3.9%. We estimate same-store physical occupancy at 96.7%.

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $404.46 million. This indicates a 13.2% year-over-year rise. This growth is anticipated to be fueled by the recovering demand for rental housing, high occupancy rates and rent growth.

Additionally, UDR enjoys a decent balance sheet position and banks on technological moves and process enhancements to fuel growth. This residential REIT focuses on enhancing cost control through its Next Generation Operating Platform. UDR projected first-quarter 2023 FFO as adjusted per share in the range of 59-61 cents.

Before the first-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO as adjusted per share has remained unchanged at 61 cents in the past month. However, this suggests year-over-year growth of 10.9%.

Potential Risks and Challenges

Despite the optimistic outlook, UDR faces certain risks and challenges that could impact its first-quarter 2023 performance. These include potential headwinds from interest rate hikes, which could increase borrowing costs and affect the company's ability to refinance existing debt.

We expect interest expenses to grow 17.1% year over year in the first quarter. Furthermore, the multifamily real estate sector could face oversupply concerns, leading to increased competition and lower rent growth.

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 chances of an FFO beat, which is not the case here.

UDR currently carries a Zacks Rank of 3 and has an Earnings ESP of -1.46%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

However, our model shows that Equity Residential (EQR - Free Report) and Independence Realty Trust, Inc. (IRT - Free Report) have the right combination of elements to report a surprise this quarter.

Equity Residential is slated to report quarterly numbers on Apr 25. EQR has an Earnings ESP of +0.31% and carries a Zacks Rank of 3 presently.

Independence Realty Trust, scheduled to report quarterly numbers on Apr 26, has an Earnings ESP of +4.82% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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


Investors will closely monitor UDR's first-quarter 2023 earnings results to evaluate the company's ability to capitalize on favorable market conditions and maintain its growth trajectory. With a strategic focus on high-demand markets, strong demographics and a robust balance sheet, UDR seems well-positioned to deliver solid results in the first quarter of 2023, benefiting from the rebound in the U.S. apartment market. However, investors should remain mindful of potential risks, such as interest rate increases and oversupply, which may impact the multifamily real estate sector.

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.

See More Zacks Research for These Tickers

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