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UDR Q2 FFO Beats on Higher Revenues, NOI Solid, View Up

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UDR Inc. (UDR - Free Report) reported funds from operations (FFO) as adjusted per share of 49 cents for second-quarter 2018, surpassing the Zacks Consensus Estimate by a whisker. The figure came in higher than the prior-year tally of 47 cents.

Total revenues in the reported quarter climbed 3.9% year over year to $256.6 million. Further, the top line marginally beat the Zacks Consensus Estimate of $253.9 million. The revenue figure also compares favorably with the prior-year figure of $247.98 million. This upside primarily stemmed from rise in revenues from operating communities.

Inside the Headlines

During the quarter under review, same-store revenues increased 3.4% year over year. However, same-store expenses flared up 2.9%. Consequently, same-store net operating income (NOI) rose 3.5% year over year. This residential REIT’s same-store physical occupancy expanded 30 basis point (bps) to 97%. The second-quarter annualized-rate of turnover contracted 200 basis points from the prior-year period to 53.6%.

At the end of the second quarter, UDR’s development pipeline aggregated $810.5 million at its pro-rata ownership interest, out of which, 96% has already been funded.

As of Jun 30, 2018, the company had around $771.1 million available from a combination of cash and undrawn capacity on its credit facilities. Furthermore, its total debt was $3.75 billion as of the same date.

Portfolio Activity

At the end of the reported quarter, the company’s Developer Capital Program investment, including accrued return, totaled $179.2 million.


For third-quarter 2018, UDR projects FFO as adjusted per share to be in the 48-50 cents range. The Zacks Consensus Estimate lies at the lower end of the guidance.

The company updated its estimates for full-year 2018. The FFO as adjusted per share lies in the range of $1.93-$1.96 compared with the prior projection of $1.91-$1.95. The Zacks Consensus Estimate lies at the lower end of the guidance. Moreover, the company anticipates same-store revenues, expenses and same-store NOI to remain in the range of 3-3.5% for the year compared with the previous estimate of 2.5-3.5%.

Our Viewpoint

UDR’s portfolio, located in targeted U.S. markets, has a superior product mix. Additionally, the company’s focus on enhancing the portfolio through expansion in core markets and sale of non-core ones has likely supported its performance. Also, an increased guidance for FFO as adjusted is encouraging.

Nevertheless, the company continues to deal with an elevated level of apartment supply in a number of its markets. This is likely to limit landlords’ ability to demand higher rents while increasing concessional activities. Moreover, any rise in interest rates remains a concern for the company.

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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 other REITs like The Macerich Company (MAC - Free Report) , Federal Realty Trust (FRT - Free Report) and Mark Cali Realty (CLI - Free Report) . All three companies are scheduled to report their Q2 numbers on Aug 1.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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