Back to top

Image: Shutterstock

Equity Residential (EQR) Tops Q4 FFO and Revenue Estimates

Read MoreHide Full Article

Equity Residential (EQR - Free Report) reported fourth-quarter 2019 normalized funds from operations (FFO) per share of 91 cents, surpassing the Zacks Consensus Estimate of 89 cents. Moreover, normalized FFO per share figure comes in 8.3% higher than the 84 cents reported in the year-ago quarter.

Results mirror improved same-store net operating income (NOI) and growth in average rental rate. The company has also provided its guidance for the ongoing year.

Total revenues in the reported quarter came in at $683.9 million, up 4.8% from the prior-year reported figure. In addition, the revenue figure comfortably outpaced the Zacks Consensus Estimate of $685 million.

For full-year 2019, normalized FFO per share came in at $3.49, ahead of the Zacks Consensus Estimate of $3.47 and the prior-year tally of $3.25. This was supported by 4.8% year-over-year growth in total revenues of $2.7 billion.

Quarter in Detail

Same-store revenues (includes 75,816 apartment units) were up 3.2% year over year to $652.4 million, while expenses flared up 3% year over year to $193.5 million. As a result, same-store NOI climbed 3.2% year over year to $458.9 million.

The company recorded 3.1% growth in average rental rate to $2,875. Physical occupancy contracted 10 basis points year over year to 96.1% for same-store portfolio. Turnover edged down to 10.6% from the year-ago period’s 10.8%.

The company exited 2019 with cash and cash equivalents of around $45.7 million, down from the $47.4 million recorded at the end of 2018. Moreover, the company boosted its liquidity and financial flexibility by upsizing its revolving credit facility to $2.5 billion from $2 billion and increasing the maximum size of the unsecured commercial-paper program to $1 billion from $500 million.

Portfolio Activity

During the reported quarter, Equity Residential acquired three apartment properties, aggregating 812 apartment units. These purchases were made for aggregate of $370.1 million at a weighted average Acquisition Capitalization Rate of 4.8%.

The company also sold two properties for around $374 million at a weighted average Disposition Yield of 4.8%. The properties are located in suburban Washington, D.C. These properties had 1,159 apartment units in total.

Outlook

For first-quarter 2020, Equity Residential projects normalized FFO per share at 84-88 cents. The Zacks Consensus Estimate for the same is currently pinned at 86 cents.

The company has also provided its outlook for the ongoing year and expects normalized FFO per share of $3.59-$3.69. The Zacks Consensus Estimate for the same is $3.62.

The company’s full-year outlook is backed by same-store portfolio revenue growth of 2.3-3.3%, physical occupancy of 96.4%, and NOI change of 1.5-3.5%.

Our Viewpoint

Equity Residential’s stellar performance in the December-end quarter was impressive. Management noted that robust demand and high resident retention drove growth in same-store revenues. Further, the company made several efforts to enhance its operating platform, including self-guided tours and installation of smart home technology at selected properties.

In the days to come, job-market growth, favorable demographics, lifestyle transformation, and creation of households will likely drive demand for its properties.

Equity Residential currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Equity Residential Price, Consensus and EPS Surprise
 

We now look forward to the earnings releases of other REITs like Camden Property Trust (CPT - Free Report) , Healthpeak Properties, Inc. and Host Hotels & Resorts, Inc. (HST - Free Report) . While Camden Property is slated to report quarterly numbers on Jan 30, Healthpeak Properties and Host Hotels will report Q4 results on Feb 11 and Feb 19, respectively.

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.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Equity Residential (EQR) - free report >>

Host Hotels & Resorts, Inc. (HST) - free report >>

Camden Property Trust (CPT) - free report >>

Published in