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Why Is Apartment Investment Management (AIV) Up 9.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Apartment Investment Management (AIV - Free Report) . Shares have added about 9.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Apartment Investment Management 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.

Aimco's Q3 FFO Surpasses Estimates, Revenues Down

Aimco reported third-quarter 2018 pro forma FFO of 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. Also, the figure remained unchanged as compared with the year-ago tally.

The company witnessed decent growth in same-store property net operating income (NOI). Further, it exited the quarter with higher same-store average daily occupancy. However, these positives were offset by lower rental and other property revenues of partnerships served by its Asset Management business.

Notably, total revenues of $242.5 million also outpaced the Zacks Consensus Estimate of $241.2 million. However, the reported figure came in lower than the prior-year quarter’s tally of $254.6 million.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 3.1% year over year to $148.9 million, while expenses (net of utility reimbursements) flared up 4.5% from the prior-year quarter to $39 million. Consequently, same-store NOI climbed 2.6% to $109.9 million on a year-over-year basis.

Same-store average daily occupancy expanded 30 basis point (bps) year over year to 96.3%. Rental rates on new leases were up 2.2%, whereas rental rates on renewal leases were up 4.2% from the expiring lease rates.

As of Sep 30, 2018, Aimco had cash and restricted cash on hand of $5.7 billion. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $2.3 billion.

Furthermore, at the end of the quarter under review, Aimco had borrowing capacity of $593 million under its revolving credit facility, after consideration of $7 million of letters of credit backed by the facility.

Portfolio Activity

During the reported quarter, Aimco invested $37 million in redevelopment and development activities. In addition, the company is revamping its portfolio through property sales, and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth.

Through these efforts, the company increased its average revenues per apartment home by 6% to $2,131. Additionally, NOI margin remained unchanged year over year at 72%. The company’s percentage of A, B and C+ home was 51%, 33% and 16%, respectively, in third-quarter 2018.

Guidance

For full-year 2018, the company updated its pro forma FFO per share guidance to $2.45-$2.49 from $2.41-$2.49 provided earlier.

The company’s full-year projections are backed by assumptions of same-store revenue growth of 3% and NOI improvement of 2.90-3.10%.

For fourth-quarter 2018, Aimco provided pro forma FFO per share guidance of 61-65 cents.

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, Apartment Investment Management has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Apartment Investment Management has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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