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MAA Stock Up 17.1% in Three Months: Will the Trend Continue?
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Shares of Mid-America Apartment (MAA - Free Report) (also known as MAA) have rallied 17.1% in the past three months, outperforming the industry's growth of 12.3%.
MAA, a residential real estate investment trust (REIT) engaged in owning, acquiring, operating and selectively developing apartment communities, primarily in the Southeast, Southwest and Mid-Atlantic regions of the United States, is poised to gain from the favorable in-migration trends of jobs and households in these submarkets.
However, an elevated supply of rental units in some markets will fuel competition and curb pricing power, restricting MAA’s rent growth momentum to an extent.
Image Source: Zacks Investment Research
Factors Behind the Surge in MAA Stock Price
Mid-America Apartment gains from its well-diversified Sun Belt-focused portfolio. The favorable in-migration trends of jobs and households in these submarkets keep renter demand up. Also, the high pricing of single-family ownership units in a high interest rate environment continues to drive the demand for rental apartments, aiding in a high level of occupancy for MAA.
This Sunbelt-focused apartment REIT opts for opportunistic investments to maintain the right product mix and raise the number of apartment communities in dynamic markets. As of the end of the second quarter of 2024, it had seven communities under development. Amid the growing demand for apartment housing across its Sunbelt markets, the company’s focus on its development pipeline is a strategic fit.
MAA continues to implement its three internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs will help the company capture the upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base.
MAA enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of June 30, 2024, MAA had a strong balance sheet with $1.0 billion of combined cash and available capacity under its unsecured revolving credit facility. It also has a low Net Debt/Adjusted EBITDAre ratio of 3.7. In the second quarter of 2024, it generated 95.9% unencumbered net operating income (NOI), providing the scope for tapping additional secured debt capital if required.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and MAA remains committed to that. In the last five years, MAA has increased its dividend seven times, and its five-year annualized dividend growth rate is 9.98%. Backed by healthy operating fundamentals, its dividend distribution becomes sustainable.
Will the Trend Last for Mid-America?
The struggle to lure renters will persist as supply volumes are expected to remain elevated in many Sunbelt markets. This phenomenon is expected to put pressure on rent growth in the upcoming period.
Competition in the residential real estate market with various housing alternatives like manufactured housing, condominiums and the new and existing home markets is concerning. This affects the company’s power to raise the rent or increase occupancy, as well as leads to aggressive pricing for acquisitions.
Although MAA’s robust development and redevelopment pipeline is encouraging for long-term growth, supply-chain constraints could lead to cost overruns. This is likely to weigh on the company’s profitability.
Analysts also don’t seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 core FFO per share moving marginally south to $8.88 over the past month.
The Zacks Consensus Estimate for Essex Property Trust’s 2024 FFO per share is pegged at $15.55, up 3.46% year over year.
The Zacks Consensus Estimate for Independence Realty Trust’s 2024 FFO per share is pegged at $1.14, unrevised over the past week.
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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MAA Stock Up 17.1% in Three Months: Will the Trend Continue?
Shares of Mid-America Apartment (MAA - Free Report) (also known as MAA) have rallied 17.1% in the past three months, outperforming the industry's growth of 12.3%.
MAA, a residential real estate investment trust (REIT) engaged in owning, acquiring, operating and selectively developing apartment communities, primarily in the Southeast, Southwest and Mid-Atlantic regions of the United States, is poised to gain from the favorable in-migration trends of jobs and households in these submarkets.
However, an elevated supply of rental units in some markets will fuel competition and curb pricing power, restricting MAA’s rent growth momentum to an extent.
Image Source: Zacks Investment Research
Factors Behind the Surge in MAA Stock Price
Mid-America Apartment gains from its well-diversified Sun Belt-focused portfolio. The favorable in-migration trends of jobs and households in these submarkets keep renter demand up. Also, the high pricing of single-family ownership units in a high interest rate environment continues to drive the demand for rental apartments, aiding in a high level of occupancy for MAA.
This Sunbelt-focused apartment REIT opts for opportunistic investments to maintain the right product mix and raise the number of apartment communities in dynamic markets. As of the end of the second quarter of 2024, it had seven communities under development. Amid the growing demand for apartment housing across its Sunbelt markets, the company’s focus on its development pipeline is a strategic fit.
MAA continues to implement its three internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs will help the company capture the upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base.
MAA enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of June 30, 2024, MAA had a strong balance sheet with $1.0 billion of combined cash and available capacity under its unsecured revolving credit facility. It also has a low Net Debt/Adjusted EBITDAre ratio of 3.7. In the second quarter of 2024, it generated 95.9% unencumbered net operating income (NOI), providing the scope for tapping additional secured debt capital if required.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and MAA remains committed to that. In the last five years, MAA has increased its dividend seven times, and its five-year annualized dividend growth rate is 9.98%. Backed by healthy operating fundamentals, its dividend distribution becomes sustainable.
Will the Trend Last for Mid-America?
The struggle to lure renters will persist as supply volumes are expected to remain elevated in many Sunbelt markets. This phenomenon is expected to put pressure on rent growth in the upcoming period.
Competition in the residential real estate market with various housing alternatives like manufactured housing, condominiums and the new and existing home markets is concerning. This affects the company’s power to raise the rent or increase occupancy, as well as leads to aggressive pricing for acquisitions.
Although MAA’s robust development and redevelopment pipeline is encouraging for long-term growth, supply-chain constraints could lead to cost overruns. This is likely to weigh on the company’s profitability.
Analysts also don’t seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 core FFO per share moving marginally south to $8.88 over the past month.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Essex Property Trust (ESS - Free Report) and Independence Realty Trust (IRT - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Essex Property Trust’s 2024 FFO per share is pegged at $15.55, up 3.46% year over year.
The Zacks Consensus Estimate for Independence Realty Trust’s 2024 FFO per share is pegged at $1.14, unrevised over the past week.
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.