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Is a Beat in the Offing for UDR This Earnings Season?
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UDR Inc. (UDR - Free Report) , a premier multifamily real estate investment trust (REIT), is set to announce third-quarter 2023 earnings results on Oct 26 after the closing bell. The company, known for owning, operating, acquiring and developing high-quality apartment communities across the United States, has been a solid choice for investors seeking exposure to the multifamily real estate sector.
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, a cent lower than the consensus mark. The quarterly results reflected lower-than-anticipated revenues.
Over the trailing four quarters, UDR’s FFO as adjusted per share surpassed the Zacks Consensus Estimate on one occasion, met once and missed in the remaining two, the average negative surprise being 0.39%. The graph below depicts the surprise history of the company:
United Dominion Realty Trust, Inc. Price and EPS Surprise
Per a recent RealPage report, apartment demand in the United States during the third quarter continued to show signs of solid rebound even though rent growth was somewhat flat.
The U.S. apartment market absorbed 90,827 units per the RealPage Market Analytics. Although the figure does not compare to the historically robust demand of 2021, it still marks the largest quarterly tally in nearly two years and is in sync with the long-term seasonal norms.
However, the quarter saw the highest levels of apartment completions since the 1980s, with more than 128,000 units coming online nationally, shifting the balance of power in the rental market back to renters.
The effective asking rents fell 0.3% in September. As a result, year-over-year rent growth was just 0.1% during the quarter. This compares with 9% recorded a year ago. The key reason behind this is that apartment operators are prioritizing occupancy rates over rents to safeguard cash flow, leading to more options for renters and putting downward pressure on rent growth.
Speaking of the U.S. apartment occupancy, despite the supply surge, the solid demand helped maintain occupancy levels near the long-term average. After slipping only 10 basis points (bps) in September, occupancy at the end of the third quarter was 94.4%.
Q3 Expectations for UDR
UDR owns a geographically-diverse portfolio with a superior product mix of A/B quality properties in urban and suburban markets. The company’s portfolio comprises properties throughout the United States, including both coastal and Sunbelt locations, with a good mix of urban and suburban communities.
This residential REIT is likely to have capitalized on the favorable operating fundamentals in its markets, which is expected to have boosted demand for its apartment units, aiding the occupancy rates and top-line growth.
Per the company’s September Investor Presentation, UDR noted that same-store revenue growth continues to be strong. In addition, blended lease rate growth of 2% from the beginning of the third quarter through Aug 31, 2023, is expected to have supported occupancy levels. Occupancy during this period was 96.8%, up from 96.5% in June. Further, the in-the-month collections for Bad Debt continued to improve sequentially.
For the third quarter of 2023, we expect the company’s same-store net operating income year-over-year growth at 6.8%. The same-store physical occupancy is estimated at 96.7%.
The Zacks Consensus Estimate for quarterly revenues is currently pegged at $411.88 million, indicating a year-over-year rise of 5.26%.
UDR’s technological investments and process enhancements are expected to have helped enhance cost control and aided margin expansion via its Next Generation Operating Platform. The platform allows the company to electronically interact with, and provide service to residents, aiding its business prospects. Its healthy balance sheet position is likely to have boosted its growth endeavors.
Nonetheless, the elevated supply of rental units in some of its markets may have increased competition and partly limited rent growth, casting a pall on the company’s quarterly performance to a certain extent. In addition, a high interest rate environment is likely to have acted as a spoilsport. Our estimate indicates a year-over-year rise of 10.3% in interest expenses in the third quarter.
UDR projected third-quarter FFO as adjusted per share in the range of 62-64 cents.
The company’s activities during the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO as adjusted per share has been unchanged at 63 cents over the past month. The figure, however, suggests year-over-year growth of 5%.
Earning Whispers
Our proven model predicts a surprise in terms of FFO per share for UDR this season. The right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — increases the odds of a beat. That is just the case here.
Earnings ESP: UDR has an Earnings ESP of +0.16%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here are some other stocks that are worth considering from the residential REIT sector, as our model shows that these, too, have the right combination of elements to deliver a surprise this reporting cycle:
AvalonBay Communities (AVB - Free Report) is slated to report quarterly numbers on Oct 25. AVB has an Earnings ESP of +0.76% and carries a Zacks Rank #2 (Buy) presently.
Equity Residential (EQR - Free Report) is slated to report quarterly numbers on Oct 31. EQR has an Earnings ESP of +0.50% and carries a Zacks Rank of 3 presently.
Spirit Realty Capital is slated to report quarterly numbers on Nov 2. SRC has an Earnings ESP of +1.43% and carries a Zacks Rank #2 presently.
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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Is a Beat in the Offing for UDR This Earnings Season?
UDR Inc. (UDR - Free Report) , a premier multifamily real estate investment trust (REIT), is set to announce third-quarter 2023 earnings results on Oct 26 after the closing bell. The company, known for owning, operating, acquiring and developing high-quality apartment communities across the United States, has been a solid choice for investors seeking exposure to the multifamily real estate sector.
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, a cent lower than the consensus mark. The quarterly results reflected lower-than-anticipated revenues.
Over the trailing four quarters, UDR’s FFO as adjusted per share surpassed the Zacks Consensus Estimate on one occasion, met once and missed in the remaining two, the average negative surprise being 0.39%. The graph below depicts the surprise history of the company:
United Dominion Realty Trust, Inc. Price and EPS Surprise
United Dominion Realty Trust, Inc. price-eps-surprise | United Dominion Realty Trust, Inc. Quote
Factors to Note
U.S. Apartment Market in Q3
Per a recent RealPage report, apartment demand in the United States during the third quarter continued to show signs of solid rebound even though rent growth was somewhat flat.
The U.S. apartment market absorbed 90,827 units per the RealPage Market Analytics. Although the figure does not compare to the historically robust demand of 2021, it still marks the largest quarterly tally in nearly two years and is in sync with the long-term seasonal norms.
However, the quarter saw the highest levels of apartment completions since the 1980s, with more than 128,000 units coming online nationally, shifting the balance of power in the rental market back to renters.
The effective asking rents fell 0.3% in September. As a result, year-over-year rent growth was just 0.1% during the quarter. This compares with 9% recorded a year ago. The key reason behind this is that apartment operators are prioritizing occupancy rates over rents to safeguard cash flow, leading to more options for renters and putting downward pressure on rent growth.
Speaking of the U.S. apartment occupancy, despite the supply surge, the solid demand helped maintain occupancy levels near the long-term average. After slipping only 10 basis points (bps) in September, occupancy at the end of the third quarter was 94.4%.
Q3 Expectations for UDR
UDR owns a geographically-diverse portfolio with a superior product mix of A/B quality properties in urban and suburban markets. The company’s portfolio comprises properties throughout the United States, including both coastal and Sunbelt locations, with a good mix of urban and suburban communities.
This residential REIT is likely to have capitalized on the favorable operating fundamentals in its markets, which is expected to have boosted demand for its apartment units, aiding the occupancy rates and top-line growth.
Per the company’s September Investor Presentation, UDR noted that same-store revenue growth continues to be strong. In addition, blended lease rate growth of 2% from the beginning of the third quarter through Aug 31, 2023, is expected to have supported occupancy levels. Occupancy during this period was 96.8%, up from 96.5% in June. Further, the in-the-month collections for Bad Debt continued to improve sequentially.
For the third quarter of 2023, we expect the company’s same-store net operating income year-over-year growth at 6.8%. The same-store physical occupancy is estimated at 96.7%.
The Zacks Consensus Estimate for quarterly revenues is currently pegged at $411.88 million, indicating a year-over-year rise of 5.26%.
UDR’s technological investments and process enhancements are expected to have helped enhance cost control and aided margin expansion via its Next Generation Operating Platform. The platform allows the company to electronically interact with, and provide service to residents, aiding its business prospects. Its healthy balance sheet position is likely to have boosted its growth endeavors.
Nonetheless, the elevated supply of rental units in some of its markets may have increased competition and partly limited rent growth, casting a pall on the company’s quarterly performance to a certain extent. In addition, a high interest rate environment is likely to have acted as a spoilsport. Our estimate indicates a year-over-year rise of 10.3% in interest expenses in the third quarter.
UDR projected third-quarter FFO as adjusted per share in the range of 62-64 cents.
The company’s activities during the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO as adjusted per share has been unchanged at 63 cents over the past month. The figure, however, suggests year-over-year growth of 5%.
Earning Whispers
Our proven model predicts a surprise in terms of FFO per share for UDR this season. The right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — increases the odds of a beat. That is just the case here.
Earnings ESP: UDR has an Earnings ESP of +0.16%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: UDR currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks That Warrant a Look
Here are some other stocks that are worth considering from the residential REIT sector, as our model shows that these, too, have the right combination of elements to deliver a surprise this reporting cycle:
AvalonBay Communities (AVB - Free Report) is slated to report quarterly numbers on Oct 25. AVB has an Earnings ESP of +0.76% and carries a Zacks Rank #2 (Buy) presently.
Equity Residential (EQR - Free Report) is slated to report quarterly numbers on Oct 31. EQR has an Earnings ESP of +0.50% and carries a Zacks Rank of 3 presently.
Spirit Realty Capital is slated to report quarterly numbers on Nov 2. SRC has an Earnings ESP of +1.43% and carries a Zacks Rank #2 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.