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Why Is Apartment Investment Management (AIV) Up 1.1% 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 1.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Aimco's Q1 FFO Meets Estimates, Revenues Beat, NOI Up

Aimco reported first-quarter 2019 pro forma FFO of 61 cents per share, in line with the Zacks Consensus Estimate. Also, the figure came in higher than the year-ago quarter’s reported tally of 59 cents.

The company recorded decent growth in same-store property NOI. However, the top line for the first quarter was negatively impacted by revenues lost from the company’s Asset Management business sale.

Notably, total revenues of $230.2 million in the reported quarter outpaced the Zacks Consensus Estimate of $229.33 million. However, the revenue figure comes in 7% lower than the prior-year quarter’s reported tally.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 4.2% year over year to $175.7 million, while expenses (net of utility reimbursements) were up 0.8% from the prior-year quarter to $47.1 million. Consequently, same-store NOI climbed 5.5% to $128.6 million on a year-over-year basis.
Same-store average daily occupancy expanded 90 basis point (bps) year over year to 97%. Rental rates on new leases were up 0.8%, whereas rental rates on renewal leases increased 5.2% from the expiring lease rates.

As of Mar 31, 2019, Aimco had cash and restricted cash of $198 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $2.5 billion.

Furthermore, at the end of the first quarter, Aimco had borrowing capacity of $723 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 $45 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 3.2% to $2,165. Additionally, NOI margin expanded 100 bps year over year to 72%. The company’s percentage of A, B and C+ home was 52%, 32% and 16%, respectively, in first-quarter 2019.

Guidance

For full-year 2019, the company reiterated pro forma FFO per share guidance of $2.41-$2.51.

The company’s full-year projections are backed by assumptions of same-store revenue growth of 2.8-3.8% and same-store expense growth of 2-3%, resulting in same-store NOI improvement of 2.7-4.5%.

For second-quarter 2019, Aimco provided pro forma FFO per share guidance of 57-61 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Apartment Investment Management has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Apartment Investment Management has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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