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Mid-America Apartment (MAA) Up 2.1% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Mid-America Apartment Communities, Inc. (MAA - Free Report) . Shares have added about 2.1% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is MAA due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Mid-America Apartment's Q1 FFO Lags, Revenues Up Y/Y

Mid-America Apartment Communities reported first-quarter 2018 FFO of $1.44 per share, missing the Zacks Consensus Estimate of $1.46. Further, the figure compared unfavorably with the prior-year quarter tally of $1.46.

However, rental and other property revenues came in at $386 million in the first quarter, 1.9% higher than the prior-year quarter tally. Further, the figure marginally surpassed the Zacks Consensus Estimate of $385 million.

The company recorded growth in average effective rent per unit as well as average physical occupancy in the quarter, though operating expenses and property management expenses flared up in the quarter.

Quarter in Detail

During the reported quarter, the same-store NOI increased to $225.4 million, recording growth of 1.9% compared with the prior-year quarter.

The same-store portfolio revenues grew 1.8% as a result of an increase in average effective rent per unit of 1.4%. Further, average physical occupancy for the same-store portfolio was 96.3%, reflecting an expansion of 30 basis points from the year-earlier quarter.

As of Mar 31, 2018, MAA held cash and cash equivalents of nearly $59.7 million, significantly up from $10.8 million as of Dec 31, 2017. Furthermore, as of the same date, around $607.2 million of combined cash and capacity were available under its unsecured revolving credit facility.

The Post Properties Merger

During first-quarter 2018, MAA incurred a total of 3 cents per share of merger and integration costs. Notably, the company expects full consolidation of MAA and Post Properties to be accomplished later this year. Additionally, MAA continues to project synergies of around $20 million in gross overhead costs to be realized from the merger.

Portfolio Activity

In first-quarter 2018, MAA completed developing Post River North located in Denver, CO, containing 359 units. Five properties, including Post River North, continued to be in lease-up as well.

MAA completed the renovation of 1,781 units under its redevelopment program. Notably, it attained an increase in the average rental rate of 9.7%, above non-renovated units.

At the end of the first quarter, MAA had two multi-family projects under development (578 units), with total projected cost of $125.8 million. Notably, an estimated $24.4 million remained to be funded as of Mar 31, 2018.

Outlook

MAA expects 2018 FFO per share in the range of $5.85-$6.15. For second-quarter 2018, the FFO per share is anticipated to be $1.43-$1.53.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to two lower.

Mid-America Apartment Communities, Inc. Price and Consensus

 

VGM Scores

At this time, MAA has a subpar Growth Score of D, though it is lagging a bit on the momentum front with an F.  The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions looks promising. Interestingly, MAA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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