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Here's Why Mid-America Apartment Stock is Worth Buying Now

Zacks Equity Research
·4 min read

Mid-America Apartment Communities, Inc. MAA — commonly known as MAA — is a wise investment bet, presently, backed by its organic growth strategies. Moreover, the company’s earnings growth prospects and industry tailwinds make it an attractive pick.

The REIT not only beat FFO per share estimates in the last reported quarter, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its prospects. Over the past 30 days, the Zacks Consensus Estimate for 2020 funds from operations (FFO) per share moved marginally north.

Further, this Zacks Rank #2 (Buy) stock has lost 1.4%, over the past three months, which is narrower than the 7.3% decline recorded by the industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Notably, MAA has a number of other aspects that make it an attractive investment option.

4 Reasons Why the Stock is a Must Buy

Focus on Organic Strategies to Drive Rent Growth: MAA’s focus on interior re-developments will likely drive additional value and rent growth. Specifically, the company is leveraging on redevelopment initiatives and smart-home installations to generate accretive returns and boost earnings from its existing asset base. It expects to install additional 16,000 units by 2020 end. Such installations will contribute to revenue growth in 2021. Moreover, MAA has 10,000-12,000 units for interior redevelopment. This is likely to propel average rental rate growth.

Resilient Portfolio Supporting Performance Amid Pandemic: The company’s portfolio is well diversified in terms of markets, sub-markets, product types and price points, cushioning it from economic downturn in any particular market, turbulence in any product type or assets belonging to specific price points. In fact, despite the pandemic, it is witnessing strong pricing for assets in the sub-urban markets. Moreover, a high-quality resident profile has resulted in a solid collection performance. Notably, MAA informed that as of Jul 27, it collected 98.9% and 98.1% of its billed rent in cash collections for the second quarter and July, respectively.

Solid Industry Fundamentals: Over the long run, favorable demographic trends — supported by the growth of prime age groups for rentals and migration of population to the Southeast and Southwest — is likely to drive household formation and apartment rental demand. Also, a significant change in lifestyle has taken place and life-cycle events are getting delayed. This is leading to an extension of the average age of first-time homeownership. The young-adult age cohort has also witnessed a considerable part of net job growth and is helping spur primary renter demand. As for MAA, the company’s properties are well positioned to benefit from such positive factors.

Favorable ROE: Also, its return on equity is 5.6% compared with the industry’s average of 4.7%. This reflects that the company reinvests its funds more efficiently.

Stocks to Consider

Front Yard Residential’s RESI FFO per share estimates for 2020 has remained unchanged at 57 cents over the past month. It sports a Zacks Rank of 1, at present.

BRT Apartments’ BRT Zacks Consensus Estimate for the current-year FFO per share has remained unrevised at 88 cents over the past month. The company currently carries a Zacks Rank of 2.

NexPoint Residential Trust’s NXRT FFO per share estimates for the ongoing year have been revised 10.6% upward to $2.40 over the past month. The company holds a Zacks Rank of 2, currently.

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.

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MidAmerica Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
 
BRT Realty Trust (BRT) : Free Stock Analysis Report
 
FRONT YARD RESIDENTIAL CORP (RESI) : Free Stock Analysis Report
 
NexPoint Residential Trust, Inc. (NXRT) : Free Stock Analysis Report
 
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Zacks Investment Research