Mid-America Apartment Communities (MAA) Down 4.2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Mid-America Apartment Communities (MAA). Shares have lost about 4.2% 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 the most recent earnings report in order to get a better handle on the important drivers.
Mid-America Apartment Q2 FFO & Revenues Beat Estimates
Mid-America Apartment reported second-quarter 2023 core FFO per share of $2.28, surpassing the Zacks Consensus Estimate by a whisker. Moreover, the reported figure climbed 12.9% year over year.
This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. MAA also revised its outlook for 2023.
Rental and other property revenues were $535.15 million, outpacing the Zacks Consensus Estimate of $534.2 million. The reported figure was 8.1% higher than the prior-year quarter’s $495.04 million.
Per Eric Bolton, the chairman and chief executive officer of MAA, “Our Sunbelt markets continue to demonstrate solid employment conditions and positive migration trends that are further supporting absorption of the new apartment supply delivering in our markets.”
Quarter in Detail
The same-store portfolio’s revenues grew 8.1% on a year-over-year basis due to a rise of 9.3% in the average effective rent per unit.
However, the average physical occupancy for the same-store portfolio in the second quarter declined 20 basis points year over year to 95.5%. Our expectation for the same was pegged at 95.8%. The resident turnover for the same period was 45.7%. Same-store portfolio operating expenses increased 7.2%.
On a blended basis, effective during the second quarter, the same-store portfolio leasing pricing of both new and renewing leases rose 3.8% from the prior lease. A 6.8% increase in renewing leases and a 0.5% increase for leases to new move-in residents supported this growth.
Moreover, the same-store NOI reflected year-over-year growth of 8.6%.
Balance Sheet Position
MAA exited the second quarter of 2023 with cash and cash equivalents of $150.2 million, up from $142.4 million recorded as of Mar 31, 2023.
As of Jun 30, 2023, MAA had a strong balance sheet with $1.4 billion in combined cash and capacity available under its unsecured revolving credit facility. Also, it had a historically low Net Debt/Adjusted EBITDAre ratio of 3.41.
As of the same date, the total debt outstanding was $4.4 billion. Its total debt average years to maturity was 7.5 years. As of Jun 30, 2023, unencumbered NOI was 95.1% of the total NOI.
Portfolio Activity
As of the end of the second quarter of 2023, MAA redeveloped 1,878 apartment homes, while Smart Home technology installations completed were in 2,276 units.
As of Jun 30, 2023, MAA had six communities under development, with a total projected cost of $735.0 million and an estimated $343.5 million remaining to be funded.
2023 Guidance
This residential REIT revised its guidance for 2023 core FFO per share to the range of $9.00-$9.28 from $8.93-$9.29 projected earlier. This implies a 3-cent increase at the midpoint to $9.14.
For the full year, management revised its outlook for same-store property revenue growth to 5.50-7.00% from 5.25-7.25% guided earlier. Also, the operating expense growth is now expected to be in the range of 5.30-6.80%, revised from 5.15-7.15% stated earlier.
As a result, the same-store NOI growth is now estimated in the band of 5.60-7.10%, revised from 5.30-7.30% anticipated earlier. Expectations for average physical occupancy for the same-store portfolio were changed to 95.4-95.6% from the previously projected range of 95.6-96.0%.
MAA projects third-quarter 2023 core FFO per share in the band of $2.18-$2.34, with the midpoint being $2.26.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Mid-America Apartment Communities 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, 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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Mid-America Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
