Shares of American Assets Trust, Inc. (AAT) are hovering around the all-time high of $27.28 (set on August 24), aided by strong second quarter 2012 results that included a 17.8% year-over-year increase in FFO (fund from operations).
With an impressive year-to-date return of 32.3% and decent earnings growth expectations of 12.8% for 2012 and 9.2% for 2013, this office REIT (real estate investment trust) is poised to continue the growth momentum that began in October 2011. American Assets Trust is presently a Zacks #1 Rank (Strong Buy).
Strong Second Quarter
American Assets Trust reported solid second quarter results on August 1 with a 13.1% year-over-year growth in total revenues to $57.8 million, primarily attributable to incremental contribution from office properties. Same-store net operating income increased 6.7% year over year to $33.4 million.
Second quarter 2012 FFO of 30 cents per share compare favorably with the year-ago FFO of 26 cents and was in line with the Zacks Consensus Estimate. Average GAAP rents (including the impact of straight-line rents) in the same-store office portfolio increased 49.4% to $44.88 per square foot, while the retail portfolio increased 5.8% to $32.25.
Based on strong second quarter results, management raised the lower end of the FFO guidance for 2012 by 2.6%. Currently, the FFO is expected between $1.17 and $1.22 per share, compared with the earlier range of $1.14 - $1.22. The guidance, however, excludes any material impact from future acquisitions, asset sales, secondary offerings or repurchases, debt financings or repayments.
Rise in Earnings Estimate Revisions
Over the past 30 days, the Zacks Consensus Estimate for 2012 increased by 2 cents or 1.6% to $1.25, which is above the higher end of the company guidance and an implied year-over-year growth of 12.8%. Four of six estimates for 2012 have moved up in the past 30 days, while only one has moved down.
For 2013, the Zacks Consensus Estimate has increased by 6 cents or 4.6% to $1.37 over the same period, representing growth of 9.2%. Three of six estimates for the year were raised, while only one was lowered.
American Assets Trust's valuation looks a bit expensive on a price-to-earnings (P/E) basis. Shares are currently trading at a forward P/E of 21.71x versus the peer group average of 18.83x. However, on a price-to-book (P/B) basis, the stock is trading at a discount of 1.61x versus the peer group average of 2.04x. Also on a price-to-sales (P/S) basis, shares are trading at 4.71x versus 5.96x for the peer group average.
Chart Resonates Growth Potential
Since January 13, 2012, shares of American Assets Trust have fared better than the simple moving average for 200 days or SMA (200). The continuous uptrend in stock prices, as mirrored in the following chart, offers an enticing upside potential going forward. Volume is fairly strong, averaging 171K daily. The year-to-date return for the stock is also noteworthy at 32.3% compared to an S&P 500 tally of 10.4%.
Headquartered in San Diego, California, American Assets Trust acquires, develops and manages premier retail, office and residential properties throughout the U.S. The properties are primarily located in some of the most dynamic, high-barrier-to-entry markets in Southern California, Northern California, Oregon, Washington and Hawaii. The vertically-integrated REIT was formed in January 2011 with an IPO of over 31.6 million shares and imbibed over 40 years of operating experience from American Assets, Inc., a privately-held corporation founded in 1967. The company presently has a market cap of $1.07 billion.
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