Equity Residential (EQR - Analyst Report) is on track to meet its full-year same store revenue guidance. In fact, this residential real estate investment trust (REIT) has reaffirmed its full-year same store revenue growth projections of 3.5%–4.0%. The company had provided the range during its second-quarter 2016 earnings release on Jul 26. It has also provided its third-quarter operating update.
Notably, in July, the company had revised its annual guidance, citing an elevated new supply and slowdown in high-paying jobs in San Francisco and New York. It lowered its revenue growth assumption to 3.5%–4.0% from 4.0%–4.5% guided earlier.
Nevertheless, for its overall markets, the company is presently meeting revised expectations with respect to occupancy and base rent. For renewals, there is normal seasonal reduction that is aggravated by San Francisco & New York rent declines. The company expects to level off at 3–4% in Q4.
Further, according to the company, the current inventory expansion in San Francisco is historic but this region still faces a structural housing shortage. Moreover, Equity Residential declared that despite slowing rents in existing properties, lease-ups remain solid.
As a matter of fact, Equity Residential has been in the headlines this year for making huge dispositions, including the sale of the Starwood portfolio, as well as countering high supply in some of its key regions. The disposition activities have been a part of the company’s portfolio repositioning efforts.
While sale of assets result in dilutive impact on earnings, the repositioning moves are expected to help it focus exclusively on its core, high-density urban markets, over the long term. However, in the near term, excess supply is likely to restrict any robust growth.
Equity Residential currently has a Zacks Rank #3 (Hold).
Investors can also consider some better-ranked stocks in the REIT industry like American Tower Corporation (AMT - Analyst Report) , CorEnergy Infrastructure Trust, Inc. (CORR - Snapshot Report) and InfraREIT, Inc. (HIFR - Snapshot Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Tower is a consistent outperformer, having beaten the Zacks Consensus Estimate over all the trailing four quarters, with an average surprise of 6.16%. CorEnergy Infrastructure has experienced 3.9% upward revision in full year 2016 estimates in the past two months. Also, InfraREIT has a long-term expected growth rate of 10% against the industry average of 5.8%, which is encouraging.
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