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What's in Store for Mid-America Apartment (MAA) in Q4 Earnings?
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Mid-America Apartment Communities (MAA - Free Report) — commonly known as MAA — is a real estate investment trust (REIT) that focuses on owning, operating and acquiring apartment communities throughout the southeast, southwest and mid-Atlantic regions of the United States. MAA is slated to report fourth-quarter and full-year 2023 results on Feb 7 after market close.
The Germantown, TN-based residential REIT delivered a surprise of 0.44% in terms of core FFO per share in the last reported quarter. Its 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 beat being 0.99%. This is depicted in the chart below:
Mid-America Apartment Communities, Inc. Price and EPS Surprise
Let’s see how things have shaped up before this announcement.
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
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.
MAA has also been investing in its existing properties to attract new tenants and retain current ones. The company has been upgrading its amenities and technology to meet the evolving needs of renters. These improvements are likely to result in high occupancy rates and rental income for MAA.
MAA 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.
However, the struggle to lure renters will persist as supply volumes are expected to remain elevated in some markets. This is likely to affect the company’s power to raise the rent or increase occupancy.
We expect same-store net operating income to increase 2.5% year over year in the fourth quarter. Meanwhile, we project average physical occupancy of 95.6%, slightly lower than the prior quarter’s 95.7%.
The Zacks Consensus Estimate for quarterly revenues is pegged at $543.37 million. This suggests a 2.92% rise from the year-ago quarter’s reported figure.
MAA projected fourth-quarter 2023 core FFO per share in the band of $2.21-$2.37, with the midpoint being $2.29.
Before the fourth-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has remained unchanged at $2.30 in the past month. This suggests a slight year-over-year decline of 0.86%.
For the full year 2023, MAA expects its core FFO per share in the range of $9.06-$9.22, with the midpoint being $9.14. This is based on the company’s outlook for same-store property revenue growth in the range of 5.75-6.75%, operating expense increase of 6-7% and same-store NOI expansion in the band of 5.5-6.5%. The company expects average physical occupancy for the same-store portfolio in the range of 95.50-95.70%, with the midpoint being 95.60%.
For the year, we expect same-store property net operating income growth of 6% year over year. For the fourth quarter, we project an occupancy of 95.6%.
For the full year, the Zacks Consensus Estimate for core FFO per share is pegged at $9.16. The figure indicates a 7.76% increase year over year on 6.43% year-over-year growth in revenues to $2.15 billion.
Here Is What Our Quantitative Model Predicts:
Our proven model predicts 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 the case here.
MAA currently has a Zacks Rank of 3 and an Earnings ESP of +0.53%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks That Warrant a Look
Here are two other stocks from the broader REIT sector — VICI Properties Inc. (VICI - Free Report) and American Homes 4 Rent (AMH - Free Report) — you may want to consider as our model shows that these also 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.
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What's in Store for Mid-America Apartment (MAA) in Q4 Earnings?
Mid-America Apartment Communities (MAA - Free Report) — commonly known as MAA — is a real estate investment trust (REIT) that focuses on owning, operating and acquiring apartment communities throughout the southeast, southwest and mid-Atlantic regions of the United States. MAA is slated to report fourth-quarter and full-year 2023 results on Feb 7 after market close.
The Germantown, TN-based residential REIT delivered a surprise of 0.44% in terms of core FFO per share in the last reported quarter. Its 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 beat being 0.99%. This is depicted in the chart below:
Mid-America Apartment Communities, Inc. Price and EPS Surprise
Mid-America Apartment Communities, Inc. price-eps-surprise | Mid-America Apartment Communities, Inc. Quote
Let’s see how things have shaped up before this announcement.
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
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.
MAA has also been investing in its existing properties to attract new tenants and retain current ones. The company has been upgrading its amenities and technology to meet the evolving needs of renters. These improvements are likely to result in high occupancy rates and rental income for MAA.
MAA 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.
However, the struggle to lure renters will persist as supply volumes are expected to remain elevated in some markets. This is likely to affect the company’s power to raise the rent or increase occupancy.
We expect same-store net operating income to increase 2.5% year over year in the fourth quarter. Meanwhile, we project average physical occupancy of 95.6%, slightly lower than the prior quarter’s 95.7%.
The Zacks Consensus Estimate for quarterly revenues is pegged at $543.37 million. This suggests a 2.92% rise from the year-ago quarter’s reported figure.
MAA projected fourth-quarter 2023 core FFO per share in the band of $2.21-$2.37, with the midpoint being $2.29.
Before the fourth-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has remained unchanged at $2.30 in the past month. This suggests a slight year-over-year decline of 0.86%.
For the full year 2023, MAA expects its core FFO per share in the range of $9.06-$9.22, with the midpoint being $9.14. This is based on the company’s outlook for same-store property revenue growth in the range of 5.75-6.75%, operating expense increase of 6-7% and same-store NOI expansion in the band of 5.5-6.5%. The company expects average physical occupancy for the same-store portfolio in the range of 95.50-95.70%, with the midpoint being 95.60%.
For the year, we expect same-store property net operating income growth of 6% year over year. For the fourth quarter, we project an occupancy of 95.6%.
For the full year, the Zacks Consensus Estimate for core FFO per share is pegged at $9.16. The figure indicates a 7.76% increase year over year on 6.43% year-over-year growth in revenues to $2.15 billion.
Here Is What Our Quantitative Model Predicts:
Our proven model predicts 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 the case here.
MAA currently has a Zacks Rank of 3 and an Earnings ESP of +0.53%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks That Warrant a Look
Here are two other stocks from the broader REIT sector — VICI Properties Inc. (VICI - Free Report) and American Homes 4 Rent (AMH - Free Report) — you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.
VICI Properties, scheduled to report quarterly numbers on Feb 22, has an Earnings ESP of +2.16% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Homes 4 Rent, slated to release quarterly numbers on Feb 22, has an Earnings ESP of +0.80% and carries a Zacks Rank of 3 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.