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Mid-America Apartment (MAA) Q2 Earnings: What's in Store?

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Mid-America Apartment Communities, Inc. MAA — commonly known as MAA — is slated to report second-quarter 2018 results on Aug 1, after the market closes. The company’s results will likely reflect year-over-year growth in revenues, while funds from operations (FFO) per share might remain flat year over year.

In the last reported quarter, this Memphis, TN-based residential real estate investment trust (REIT) delivered a negative surprise, with respect to FFO per share, of 1.4%. Quarterly results reflected rise in operating expenses as well as property management expenses.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate in three occasions and missed in the other. It delivered an average positive surprise of 1.02% during this period. The graph below depicts this surprise history:

Mid-America Apartment Communities, Inc. Price and EPS Surprise

Mid-America Apartment Communities, Inc. Price and EPS Surprise | Mid-America Apartment Communities, Inc. Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

Per the latest report from the real estate technology and analytics firm, RealPage, Inc. RP , rent growth in the U.S. apartment market is slowing down, with U.S. apartment rents increasing at an annual pace of just 2.3%, as of mid-2018. However, a mid-2018 occupancy level of 95% is still healthy and reflects solid demand despite high deliveries in the market.

Nonetheless, this Sunbelt-focused apartment REIT, with robust presence in the Southeast and Southwest regions, is anticipated to benefit from its diverse portfolio, moving ahead. In fact, the Zacks Consensus Estimate for second-quarter revenues is currently pegged at $390.2 million, denoting projected growth of 1.9% year over year.

Specifically, the company is anticipated to benefit from favorable demographic trends in the upcoming period. There is a steady demand for rental apartments from both new millennial households and empty nesters. Along with this, a healthy job market is estimated to spur demand for apartments.

Further, during the quarter under review, the company made decent efforts to reshuffle its portfolio. In April, it acquired a new 374-unit multifamily apartment community — Sync36 — in Denver, CO. The company plans an expansion of the property in late 2018. Further, it sold a 29-acre land parcel, situated in Lag Vegas, for $9.5 million.

However, the company has been dealing with escalating deliveries in a number of its markets. This remains a concern as elevated levels of supply curtail landlords’ ability to demand higher rents and result in lesser absorption. Consequently, concession levels are likely to remain at the higher end, while pricing power of MAA is expected to have been limited in the June-end quarter.

Furthermore, MAA’s activities during the quarter under review were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate for FFO per share remained unchanged at $1.48 over the last 30 days. For second-quarter 2018, management anticipates FFO per share of is $1.43-$1.53.

Earnings Whispers

Our proven model does not conclusively show that MAA is likely to beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: MAA has an Earnings ESP of -0.24%

Zacks Rank: MAA has a Zacks Rank of 3

Although a favorable Zacks Rank is a meaningful and leading indicator of a likely beat in terms of FFO per share, we also need a positive Earnings ESP to be reasonably confident of a positive surprise.

Stocks That Warrant a Look

While the other players in this space are lined up to report financial results, below are two stocks, poised to beat estimates per the proven Zacks model.

Bluerock Residential Growth REIT BRG, slated to release Q2 results on Aug 14, has an Earnings ESP of +5.88% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Equity Residential EQR, scheduled to report its quarterly figures on Aug 2, has an Earnings ESP of +0.08% and a Zacks Rank #2.

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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RealPage, Inc. (RP) : Free Stock Analysis Report
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Bluerock Residential Growth REIT, Inc. (BRG) : Free Stock Analysis Report
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