Invitation Homes' (INVH) Rating Outlook Upgraded by Fitch
Acknowledging Invitation Homes Inc.’s INVH balance sheet and capital access strength, credit rating agency — Fitch Ratings — recently upgraded its rating outlook for the company to ‘Positive’ from ‘Stable’. The agency affirmed INVH’s ratings, including the ‘BBB’ long-term issuer default ratings.
Going by Fitch’s statement, Invitation Homes’ solid financial position poises it well to capitalize on opportunistic transactions while addressing its upcoming maturities comfortably. Fitch further noted that the company’s healthy relationships with builders, joint venture partnerships and capital recycling program have enabled it to fund growth opportunities without stressing its balance sheet.
The rating outlook upgrade will likely boost INVH’s creditworthiness in the market and, in all likelihood, intensify investors' confidence in the stock. Such encouraging moves allow the company to enjoy favorable costs on debts and solid access to capital.
This premier single-family home leasing company operates in markets with strong demand drivers, high barriers to entry, and high rent growth potential, primarily in the Western United States, Florida, and the Southeast United States. Notably, as of Jun 30, 2023, it has leased more than 80,000 homes in 16 markets across the country.
INVH recently posted solid second-quarter results, aided by robust demand for its properties. This fueled rental revenue growth and helped the company to maintain a high occupancy level of 97.6%.
Core funds from operations (FFO) per share increased 4.8% year over year to 44 cents. The figure missed the Zacks Consensus Estimate by just a whisker. Its quarterly revenues of $600.4 million rose 7.7% from the prior-year period’s tally and surpassed the consensus mark marginally.
On the balance sheet front, INVH had $1.4 billion of available liquidity as of Jun 30, 2023, through a combination of unrestricted cash and undrawn capacity on its revolving credit facility. Its net debt to trailing twelve months (TTM) adjusted EBITDAre was 5.3X as of Jun 30, improving from 5.7X as of Dec 31, 2022.
As part of its long-term debt strategy, the company aims to improve its credit ratings and targets a net debt that is roughly 5.5 to 6.0 times of the TTM adjusted EBITDAre.
Analysts seem bullish on the Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for the company’s 2023 FFO per share indicates a favorable outlook for the company as it has been revised marginally upward in the past month to $1.79.
Shares of INVH have gained 13.1% in the year-to-date period compared with the industry’s growth of 0.2%.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks from the residential REIT sector are Equity Residential EQR and American Homes 4 Rent AMH. Each of these companies presently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Equity Residential’s 2023 FFO per share has moved marginally upward in the past week to $3.78.
The consensus mark for American Homes’ current-year FFO per share has been raised 1.2% northward in the past month to $1.65.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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