We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
What's in Store for Equity Residential (EQR) in Q4 Earnings?
Read MoreHide Full Article
Equity Residential (EQR - Free Report) is slated to report fourth-quarter and full-year 2023 results after the closing bell on Jan 30. The company’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Chicago, IL-based residential real estate investment trust’s (REIT) normalized FFO per share of 96 cents narrowly missed the Zacks Consensus Estimate of 97 cents. Rental income lagged the consensus mark, and results reflected a weak performance in its West Coast markets, along with the Rite Aid bankruptcy.
Over the trailing four quarters, Equity Residential met the Zacks Consensus Estimate on two occasions for as many misses, the average negative surprise being -0.54%. The graph below depicts this surprise history:
As we approach the release of Equity Residential's fourth-quarter 2023 earnings report, it is important to examine how this residential REIT is likely to have performed amid the current market conditions.
US Apartment Market in Q4
Per RealPage data, although there was a significant recovery in apartment demand in the fourth quarter, it was not enough to keep up with the huge amounts of new supply, with the onslaught affecting occupancy and rent growth.
There was demand for 58,200 units in the fourth quarter, pushing the total demand figure to 233,741 units in the 12-month period, which marked a considerable change from net move-outs from 123,290 units recorded in 2022. However, there were massive amounts of new supply, with 129,015 units being delivered in the fourth quarter across the top 150 markets tracked by RealPage, bringing the total number of units delivered to 439,394 in 2023.
With supply outpacing demand, the occupancy level was 94.2%, contracting 30 basis points (bps) in the quarter and 90 points year over year. Apart from the occupancy rate, operators’ pricing power was also affected, with fourth-quarter rents contracting 1.3% but increasing 0.2% in the year. The monthly rent was $1,805, while the rent per square foot was $1.986.
Projections
Amid this rebound in demand, Equity Residential’s quarterly performance is likely to have been supported by its portfolio diversification efforts in the urban and suburban markets. EQR’s target residents are more affluent, with lower unemployment and favorable prospects ahead.
The company has a healthy balance sheet and banks on technology, scale and organizational capabilities to drive growth. EQR’s robust balance sheet position is expected to have supported its development activities during the to-be-reported quarter.
However, rising supply and the winter months are likely to have played a spoilsport. Per its November Investor Update presentation, news lease change was down 3.1% in October compared to an increase of 0.5% in the third quarter, and the renewal rate achieved in October was 5% compared with 5.5% in the third quarter. The blended rate in October was 1.6%, down from 3.1% in the third quarter.
We expect fourth-quarter same-store revenues to decline 3.8% year over year, while same-store net operating income (NOI) is estimated to decline 1.5%. Physical occupancy is expected at 95.9%, suggesting a 10-basis point decrease sequentially.
Currently, the Zacks Consensus Estimate for the company’s quarterly revenues stands at $727.55 million, indicating a 3.98% increase year over year.
For the fourth quarter of 2023, Equity Residential projected normalized FFO per share in the band of 99 cents-$1.01.
However, before the fourth-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly normalized FFO per share has remained unchanged in the past month at $1.00. Nevertheless, it suggests year-over-year growth of 6.38%.
For the full year 2023, Equity Residential projected normalized FFO per share in the band of $3.77-$3.79. The company’s full-year guidance incorporates a same-store revenue growth projection of 5.5%, while expenses are expected to increase by 4.25%. Consequently, NOI is estimated to expand 6.2%. Physical occupancy is expected at 95.9%.
For the full year, the Zacks Consensus Estimate for normalized FFO per share is pegged at $3.77. The figure indicates a 7.1% increase year over year on 5.1% year-over-year growth in revenues to $2.87 billion.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Equity Residential 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.
Equity Residential currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of 0.00%. 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 — Welltower Inc. (WELL - Free Report) , VICI Properties Inc. (VICI - Free Report) and Kimco Realty Corporation (KIM - 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.
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
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
What's in Store for Equity Residential (EQR) in Q4 Earnings?
Equity Residential (EQR - Free Report) is slated to report fourth-quarter and full-year 2023 results after the closing bell on Jan 30. The company’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this Chicago, IL-based residential real estate investment trust’s (REIT) normalized FFO per share of 96 cents narrowly missed the Zacks Consensus Estimate of 97 cents. Rental income lagged the consensus mark, and results reflected a weak performance in its West Coast markets, along with the Rite Aid bankruptcy.
Over the trailing four quarters, Equity Residential met the Zacks Consensus Estimate on two occasions for as many misses, the average negative surprise being -0.54%. The graph below depicts this surprise history:
Equity Residential Price and EPS Surprise
Equity Residential price-eps-surprise | Equity Residential Quote
As we approach the release of Equity Residential's fourth-quarter 2023 earnings report, it is important to examine how this residential REIT is likely to have performed amid the current market conditions.
US Apartment Market in Q4
Per RealPage data, although there was a significant recovery in apartment demand in the fourth quarter, it was not enough to keep up with the huge amounts of new supply, with the onslaught affecting occupancy and rent growth.
There was demand for 58,200 units in the fourth quarter, pushing the total demand figure to 233,741 units in the 12-month period, which marked a considerable change from net move-outs from 123,290 units recorded in 2022. However, there were massive amounts of new supply, with 129,015 units being delivered in the fourth quarter across the top 150 markets tracked by RealPage, bringing the total number of units delivered to 439,394 in 2023.
With supply outpacing demand, the occupancy level was 94.2%, contracting 30 basis points (bps) in the quarter and 90 points year over year. Apart from the occupancy rate, operators’ pricing power was also affected, with fourth-quarter rents contracting 1.3% but increasing 0.2% in the year. The monthly rent was $1,805, while the rent per square foot was $1.986.
Projections
Amid this rebound in demand, Equity Residential’s quarterly performance is likely to have been supported by its portfolio diversification efforts in the urban and suburban markets. EQR’s target residents are more affluent, with lower unemployment and favorable prospects ahead.
The company has a healthy balance sheet and banks on technology, scale and organizational capabilities to drive growth. EQR’s robust balance sheet position is expected to have supported its development activities during the to-be-reported quarter.
However, rising supply and the winter months are likely to have played a spoilsport. Per its November Investor Update presentation, news lease change was down 3.1% in October compared to an increase of 0.5% in the third quarter, and the renewal rate achieved in October was 5% compared with 5.5% in the third quarter. The blended rate in October was 1.6%, down from 3.1% in the third quarter.
We expect fourth-quarter same-store revenues to decline 3.8% year over year, while same-store net operating income (NOI) is estimated to decline 1.5%. Physical occupancy is expected at 95.9%, suggesting a 10-basis point decrease sequentially.
Currently, the Zacks Consensus Estimate for the company’s quarterly revenues stands at $727.55 million, indicating a 3.98% increase year over year.
For the fourth quarter of 2023, Equity Residential projected normalized FFO per share in the band of 99 cents-$1.01.
However, before the fourth-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly normalized FFO per share has remained unchanged in the past month at $1.00. Nevertheless, it suggests year-over-year growth of 6.38%.
For the full year 2023, Equity Residential projected normalized FFO per share in the band of $3.77-$3.79. The company’s full-year guidance incorporates a same-store revenue growth projection of 5.5%, while expenses are expected to increase by 4.25%. Consequently, NOI is estimated to expand 6.2%. Physical occupancy is expected at 95.9%.
For the full year, the Zacks Consensus Estimate for normalized FFO per share is pegged at $3.77. The figure indicates a 7.1% increase year over year on 5.1% year-over-year growth in revenues to $2.87 billion.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Equity Residential 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.
Equity Residential currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of 0.00%. 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 — Welltower Inc. (WELL - Free Report) , VICI Properties Inc. (VICI - Free Report) and Kimco Realty Corporation (KIM - 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.
Welltower is slated to report quarterly numbers on Feb 13. WELL has an Earnings ESP of +0.80% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
VICI Properties, scheduled to report quarterly numbers on Feb 22, has an Earnings ESP of +2.16% and carries a Zacks Rank of 3.
Kimco Realty, slated to release quarterly numbers on Feb 8, has an Earnings ESP of +2.56% and carries a Zacks Rank of 2 at present.
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.