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Mid-America Apartment Communities (MAA) Down 2.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Mid-America Apartment Communities (MAA). Shares have lost about 2.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mid-America Apartment Communities 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 drivers.

Mid-America Apartment Q2 FFO & Revenues Top Estimates

MAA reported second-quarter 2021 core FFO per share of $1.69, surpassing the Zacks Consensus Estimate of $1.64. The reported number increased 6.3% from the year-ago figure of $1.59.

The residential REIT’s quarterly results were driven by an increase in average effective rent per unit for the same-store portfolio. Average physical occupancy for the same-store portfolio also increased year over year.

Rental and other property revenues came in at $436.9 million in the June-end quarter, outpacing the Zacks Consensus Estimate of $429.7 million. The reported figure is also 5.8% higher than the year-ago quarter’s $413 million.

Per management, “Strong rent growth and high occupancy, driven by a growing demand for housing across the Sunbelt region, drove solid second quarter results that were ahead of expectations.”

Quarter in Detail

Same-store portfolio’s revenues grew 4.7% on a year-over-year rise of 3.1% in average effective rent per unit. Average physical occupancy for the same-store portfolio in the second quarter was 96.4%, up 1% year over year. In the second quarter, lease pricing at the company’s same-store portfolio for both new and renewing leases compared with the prior lease grew 8.2% on a combined basis.

However, same-store portfolio property operating expenses flared up 6.3%.

Same-store NOI reflects year-over-year growth of 3.6%.

Balance Sheet Position

As of Jun 30, 2021, $748.4 million of combined cash and capacity were available under its unsecured revolving credit facility, net of commercial paper borrowings. As of the same date, the total debt outstanding was $4.6 billion.

As of Jun 30, 2021, unencumbered NOI was 94.6% of the total NOI.

As of the same date, MAA held cash and cash equivalents of $31.9 million, up from the $25.2 million reported at the end of 2020.

Portfolio Activity

In the reported quarter, MAA completed the construction of Novel Midtown in the Phoenix, AZ market.

During the second quarter, the company redeveloped 1,836 units. As of Jun 30, 2021, it had eight development communities under construction, with a projected average stabilized NOI yield of 6%.

Outlook

MAA projects 2021 core FFO per share at $6.65-$6.85, the mid-point being $6.75.

It expects same-store property revenue growth of 3.75-4.25%, while same-store property operating expense growth is projected at 4.25-4.75%. The company anticipates same-store NOI growth of 3.25-4.25%.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Mid-America Apartment Communities has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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


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