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MAA's Q2 FFO Beats Estimates, Revenues Grow, View Updated

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Mid-America Apartment Communities, Inc. (MAA - Free Report) , commonly referred as MAA, reported second-quarter 2017 funds from operations (FFO) of $1.48 per share, beating the Zacks Consensus Estimate of $1.45. However, the figure decreased from $1.54 reported in the prior-year quarter.

The company’s quarterly results reflected growth in same store property net operating income (NOI) and rise in average effective rent per unit for the same store portfolio.

Total operating revenue came in at $382.8 million in second-quarter 2017, exceeding the prior-year quarter figure by 40.6%. The Zacks Consensus estimate for revenues was also $382.8 million.

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share.

Quarter in Detail

During the quarter, adjusted same store NOI grew 2.8% compared with the prior-year quarter. This was because of 2.3% growth in revenues and a 1.6% rise in operating expenses.

In the large market, 2.1% growth in revenues and a 1.3% increase in expenses resulted in NOI to increase 2.6%. Again, in the secondary market, 2.9% rise in revenues and 2.5% increase in expenses led to 3.1% growth in NOI.

The quarter witnessed 2.4% year-over-year increase in average effective rent per unit. Further, during the quarter, average physical occupancy for same store portfolio was 96.1%, in line with the prior-year quarter.

As of Jun 30, 2017, MAA held cash and cash equivalent of $39.7 million, up from $33.5 million as of Dec 31, 2016. Further, as of the same date, around $877.3 million of combined cash and capacity was available under its unsecured credit facility.

Post Properties Merger

MAA incurred merger costs of $1 million, or 1 cents per share in the quarter, for the merger with Post Properties, Inc, .which primarily comprised severance, legal, professional and advisory costs.

Other Portfolio Activities

During the quarter, the company did not go for any property acquisitions. As of Jun 30, 2017, MAA had six development projects underway.

2017 Outlook

MAA expects 2017 FFO per share to be in the range of $5.77–$5.97, up from the prior guidance. Currently, the Zacks Consensus Estimate for 2017 FFO is $5.89 per share.

For the third-quarter 2017, FFO per share is anticipated to be in the range of $1.39–$1.49 per share, up from the prior guidance. Presently, the Zacks Consensus Estimate for third-quarter 2017 FFO is $1.48 per share.

Our Viewpoint

MAA’s well-balanced portfolio and focus on making strategic investments augur well for the company. However, concentration of its operations in certain markets is a concern for MAA.

Currently, MAA carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company gained 4.4% year to date, underperforming 6.6% growth for the industry it belongs to.

We now look forward to the earnings releases of GGP Inc. (GGP - Free Report) , Vornado Realty Trust (VNO - Free Report) and HCP, Inc. (HCP - Free Report) , which are expected next week.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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