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Why Is Mid-America Apartment Communities (MAA) Up 3.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Mid-America Apartment Communities (MAA - Free Report) . Shares have added about 3.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mid-America Apartment Communities 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 drivers.

Mid-America Apartment Q2 FFO Surpasses on Higher NOI

MAA reported second-quarter 2018 FFO of $1.55 per share, handily surpassing the Zacks Consensus Estimate of $1.48. Further, the figure compared favorably with the prior-year tally of $1.48.

This residential REIT’s quarterly results reflected growth in same-store net operating income (NOI) and rise in average effective rent per unit for the same-store portfolio.

Rental and other property revenues came in at $390.1 million in the quarter, 1.9% higher than the prior-year tally. However, the figure marginally missed the Zacks Consensus Estimate of $390.2 million.

Quarter in Detail

During the reported quarter, the company’s same-store NOI increased to $224.2 million, recording 1.7% year-over-year growth.

The same-store portfolio revenues inched up 1.5% as a result of an increase in average effective unit of 1.7%. Moreover, average physical occupancy for the same-store portfolio was 96%, reflecting a contraction of 10 basis points from the year-earlier quarter.

As of Jun 30, 2018, MAA held cash and cash equivalents of nearly $32.6 million, significantly up from $10.8 million as of Dec 31, 2017. Furthermore, as of the same date, around $920.1 million of combined cash and capacity were available under its unsecured revolving credit facility.

The Post Properties Merger

During second-quarter 2018, MAA incurred a total of 2 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 this merger.

Portfolio Activity

During the quarter under review, MAA purchased a new 374-unit multifamily apartment community — Sync36 — situated in Denver, CO.  The acquisition agreement, which the company signed in December 2017, was subject to the completion of the construction of phase I. The development of phase II is expected to start in third-quarter 2018.

It also sold a 29-acre land parcel in Las Vegas, for $9.5 million.
MAA completed the renovation of 2,239 units under its redevelopment program. Notably, it attained an increase in the average rental rate of 10.9%, above non-renovated units.

At the end of the April-June quarter, MAA had four development community projects under construction, with total projected cost of $219.8 million. Notably, an estimated $97.1 million remained to be funded as of Jun 30, 2018. Six properties, containing 1,833 units, continue to be in lease-up as well.

Outlook

MAA revised its guidance for 2018 FFO per share and expects it to be in the range of $5.96-$6.16, up from the previous band of $5.85-$6.15.

The FFO per share for the ongoing quarter is anticipated to be $1.45 to $1.55.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Mid-America Apartment Communities has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

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




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