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Aimco (AIV) Gears Up for Q4 Earnings: What's in the Offing?

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Apartment Investment & Management Co. (AIV - Free Report) — commonly known as Aimco — is slated to report fourth-quarter and 2019 results on Jan 31, after the market closes. While the company’s quarterly funds from operations (FFO) per share are expected to have remained flat, its revenues might reflect a year-over-year decline.

In the last reported quarter, the Denver, CO-based residential real estate investment trust (REIT) delivered a positive surprise of 1.6% in terms of FFO per share. Results benefited from decent growth in same-store property net operating income (NOI) and lower cost of leverage.

Aimco has a mixed earnings surprise history. Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on one occasion, reported in-line results in another and missed in the other two. It reported an average negative surprise of 0.40%. This is depicted in the chart below:

Apartment Investment and Management Company Price and EPS Surprise

Let’s see how things have shaped up for this announcement.

Following a robust prime leasing season in 2019, the U.S. apartment rental market put up a decent show in the December-end quarter despite the seasonally-low demand for apartments during the colder months, as renters usually prefer less to move in winters.

Per the latest report from RealPage, Inc. RP, apartment occupancy at the end of fourth-quarter 2019 was 95.8%, reflecting an expansion of 40 basis points (bps), year on year. Moreover, a healthy job market and low unemployment rates drove steady rent growth for the apartment sector in the October-December period. In fact, rents for new-resident leases were up 2.8% in 2019, hovering around the 3% level that the apartment market has been witnessing since late 2016.

These quarterly gains posted by the U.S multi-family market are anticipated to have supported Aimco’s performance during the period under consideration.

The company’s portfolio is diversified both in terms of geography and price point, and situated in some key markets in the United States. This is expected to have enabled it to witness healthy demand in the fourth quarter owing to favorable demographics, household formation and job-market growth. Further, efforts to improve portfolio quality and investments in valuable properties are anticipated to have fueled bottom-line growth.

In early December, Aimco announced two transactions related to the partnership which owns Parkmerced Apartments — a 3,221-apartment home community positioned on a 152-acre site in Southwest San Francisco. Specifically, it announced a $275-million loan with accruing annual interest at 10% to the partnership which owns Parkmerced Apartments. This loan will offer current income to Aimco and is expected to have been slightly accretive to fourth-quarter 2019 FFO.

Nevertheless, apartment deliveries might have remained elevated in a number of the company’s markets. Continued supply is a concern because it curtails landlords’ ability to command more rent and result in lesser absorption. Such an environment might have resulted in aggressive rental concessions and moderate pricing power for Amico. This is likely to have marred its top-line growth. 

Further, sale of its Asset Management business are expected to have eroded the company’s revenues. In fact, the Zacks Consensus Estimate for fourth-quarter revenues is pegged at $230.53 million, indicating a decline of 0.6% from the year-ago quarter reported figure.

Moreover, Aimco’s activities during the quarter were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate for fourth-quarter 2019 FFO per share remained unchanged over the past 30 days at 65 cents. For the December-end quarter, management projects pro-forma FFO per share of 62-66 cents.

In addition, the Zacks Consensus Estimate for 2019 FFO per share is $2.5. Management’s outlook for full-year pro-forma FFO per share is $2.47-$2.51.

Here is What Our Quantitative Model Predicts

Our proven model predicts a beat in terms of FFO per share for Aimco this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of a beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Aimco currently carries a Zacks Rank of 2 and has an Earnings ESP of +0.77%.

Other Stocks That Warrant a Look

AvalonBay Communities, Inc. AVB, scheduled to release October-December quarter results on Feb 5, has an Earnings ESP of +0.46% and currently holds a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Essex Property Trust, Inc. ESS, set to report quarterly numbers on Jan 29, has an Earnings ESP of +0.09% and carries a Zacks Rank of 3, at present.

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

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