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Equity Residential (EQR) Down 1.1% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Equity Residential (EQR). Shares have lost about 1.1% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Equity Residential due for a breakout? 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.

Equity Residential Q1 FFO and Revenues Top Estimates

Equity Residential reported first-quarter 2019 normalized FFO per share of 82 cents, which surpassed the Zacks Consensus Estimate by a penny. Moreover, normalized FFO per share figure came in higher than the 77 cents reported in the year-ago quarter.

Results mirror improved same-store NOI and lease-up NOI, and other non-same store NOI. Further, its transaction activities in 2018 and 2019 had a positive impact on NOI. Management noted that there was strong demand across the company’s markets as well as reduced new supply in New York and Boston, which contributed to the company’s performance.

Total revenues in the reported quarter came in at $662.5 million, up 4.7% from the prior-year tally. In addition, the revenue figure comfortably outpaced the Zacks Consensus Estimate of $654.1 million.

Quarter in Detail

Same-store revenues (includes 74,166 apartment units) were up 3.1% year over year to $622.6 million, while expenses flared up 4.4% year over year to $191.3 million. As a result, same-store NOI climbed 2.5% year over year to $431.3 million.

The company recorded 2.8% growth in average rental rate to $2,796. Physical occupancy expanded 30 basis points year over year to 96.3% for same-store portfolio.

The company exited first-quarter 2019 with cash and cash equivalents of around $29.4 million, down from $47.4 million recorded at the end of the previous quarter. During the first quarter, the company closed a new $288.1 million secured loan, having a 10 year term, interest only and carrying a fixed interest rate of 3.94%.

Portfolio Activity

During the reported quarter, Equity Residential acquired three apartment properties in Jersey City, NJ, Seattle and Denver, aggregating 579 apartment units. The purchase was made for around $258.7 million at a weighted average Acquisition Capitalization Rate of 4.6%.
 
Equity Residential did not sell any properties during the March-end quarter.

Outlook

For second-quarter 2019, Equity Residential projects normalized FFO per share at 82-86 cents.

For full-year 2019, the company expects normalized FFO per share of $3.34-$3.44. The company’s full-year outlook is backed by same-store portfolio revenue growth of 2.2- 3.2%, physical occupancy of 96.2%, and NOI change of 1.5-3.0%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Equity Residential has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Equity Residential has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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