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Aimco Hits 52-Week High on Improving Sector Fundamentals

Zacks Equity Research

Shares of Apartment Investment and Management Company (AIV) – better known as Aimco – reached a 52-week high of $33.02 towards the end of the trading session on Tuesday, Jul 8, 2014, thanks to the improving fundamentals of the U.S. apartments sector. Also, the stock gained momentum following strong first-quarter 2014 results.

The closing price of $32.80 of this real estate investment trust (:REIT) represented a robust year-to-date return of 28.8%. The average trading volume for the session was over 1.18 million shares.

Despite hitting its 52-week high, this Zacks Rank #3 (Hold) stock has plenty of upside left, given the further anticipated healthy recovery in apartment market performance metrics and expected long-term growth of 6.28%.

Growth Drivers

The apartment sector is continuing its growth momentum with the apartment operators enjoying strong pricing power. As per the market intelligence division of RealPage, Inc. (RP), the effective rents of new leases rose 1.9% in 100 largest apartment markets of the U.S. in second-quarter 2014 – an impressive 14-year high. Rising apartments demand pushed up the occupancy in these markets to 95.6% as against 95.0% in first-quarter 2014.

With over 1 million households forming each year in the U.S. primarily due to the increasing echo boomers population, we believe that the demand for Aimco’s properties will remain high in the coming years.

Notably, Aimco has a strong portfolio of B/B+ geographically diversified assets situated among the largest coastal and job growth markets in the United States. This diversification helps limit the effect of a significant local downturn, and in recent years, the portfolio has enabled it to enjoy relatively stable revenues. Additionally, Aimco is revamping its portfolio through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and greater-than-expected growth. 

On May 1, 2014, Aimco reported first-quarter 2014 pro forma funds from operations (:FFO) of 50 cents per share, a penny ahead of the Zacks Consensus Estimate and 2 cents above the year-ago quarter figure. Results were backed by strong operating portfolio performance, lower offsite costs and interest expense. Also, Aimco increased its 2014 pro forma FFO per share guidance range.

Over the last 7 days, the Zacks Consensus Estimate for 2014 and 2015 remained stable at $2.06 and $2.20 per share, respectively.

Other Stocks to Consider

Apart from Aimco, other apartment REITs that reached 52-week highs on Jun 8 include Equity Residential (EQR) and Essex Property Trust Inc. (ESS).

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

Read the Full Research Report on AIV
Read the Full Research Report on EQR
Read the Full Research Report on ESS
Read the Full Research Report on RP

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