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UDR Q3 FFO In Line With Expectations, Revenues Increase

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Residential REIT, UDR Inc. (UDR - Free Report) reported funds from operations (FFO) as adjusted per share of 47 cents for third-quarter 2017, matching the Zacks Consensus Estimate. The figure also came higher than the prior-year quarter tally of 45 cents.

Total revenues improved 3.2% year over year to $251.1 million. Additionally, it exceeded the Zacks Consensus Estimate of $250.1 million. Growth in revenues from same-store communities and stabilized, non-mature communities backed the increase.

In addition, the company increased its full-year 2017 FFO as adjusted per share and same-store guidance ranges.

United Dominion Realty Trust, Inc. Price, Consensus and EPS Surprise

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

Inside the Headlines

During the quarter, same-store revenues increased 3.3% year over year while same-store expenses climbed 3.9%. Consequently, same-store net operating income (NOI) rose 3% year over year. However, the company’s same-store physical occupancy remained flat at 96.7%. The third-quarter annualized rate of turnover contracted 140 basis points from the prior-year period to 62.6%.

At the end of the third quarter, UDR’s development pipeline aggregated $975.6 million. This included $165.1 million of completed, non-stabilized projects and $810.5 million of under-construction developments.

As of Sep 30, 2017, the company had around $851.1 million available from a combination of cash and undrawn capacity on its credit facilities. Further, the company’s total debt was $3.7 billion as of the same date.

Portfolio Activity

At the end of the third quarter, the company’s Developer Capital Program investment, including accrued return, totaled $273 million.

Guidance

For fourth-quarter 2017, UDR projects FFO as adjusted per share in the 47-49 cents range. The Zacks Consensus Estimate of 47 cents lies within this guidance.

For full-year 2017, the company projects FFO as adjusted per share of $1.86-$1.88. The Zacks Consensus Estimate of $1.86 also lies within this range. Moreover, the company anticipates same-store revenues to climb 3.5-3.9%, expenses to increase 3.1-3.6% and same-store NOI to grow 3.6-4.2% for the year.

Our Viewpoint

With a superior portfolio in the targeted U.S. markets and disciplined capital allocation, UDR is well poised for growth. Moreover, focus on enhancing portfolio through expansion in core markets is likely to support its momentum. However, elevated deliveries in a number of its markets remain a concern. Also, rate hikes add to the company’s woes.

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

We now look forward to the earnings releases of the other residential REITs — Federal Realty Investment Trust (FRT - Free Report) , Essex Property Trust Inc. (ESS - Free Report) and Extra Space Storage Inc (EXR - Free Report) — which are also scheduled to report third-quarter results on Nov 1.

The stock has gained 5.7% year to date, outperforming the 5.1% rally of the industry it belongs to.



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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