It has been about a month since the last earnings report for Equity Residential (EQR). Shares have added about 3.5% in that time frame, outperforming the S&P 500 .
Will the recent positive trend continue leading up to its next earnings release, or is Equity Residential due for a pullback? 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.
Equity Residential Q2 FFO Beats Estimates, View Up
Equity Residential reported second-quarter 2018 normalized FFO per share of 81 cents, beating the Zacks Consensus Estimate of 80 cents by a whisker. Moreover, normalized FFO per share figure came in higher than 77 cents reported in the year-ago quarter.
Results mirror enhanced same-store NOI and lease-up NOI. Nonetheless, the company incurred higher total interest expense in the quarter.
Also, total revenues in the reported quarter came in at $639.8 million, up 4.5% from the prior-year tally. In addition, the revenue figure surpassed the Zacks Consensus Estimate of $637.9 million.
Per management, there was solid demand for rental housing across its markets in the primary leasing season of the year. In fact, despite high levels of new supply, elevated demand and focus on customer service aided high occupancy level and improved resident retention. Therefore, the company has raised the mid-point of full-year same-store revenue guidance.
Quarter in Detail
Same-store revenues (includes 72,629 apartment units) were up 2.2% year over year to $599.6 million, while expenses flared up 3.2% year over year to $177.7 million. As a result, same-store NOI inched up 1.8% year over year to $421.9 million.
The company recorded 1.9% growth in average rental rate to $2,752. Physical occupancy expanded 40 basis points year over year to 96.2% for same-store portfolio.
The company exited the second quarter with cash and cash equivalents of around $34.5 million, down from $44.5 million recorded at the end of the previous quarter.
During the reported quarter, Equity Residential acquired a Hoboken, NJ property, having 240 apartment units for around $146.0 million at an acquisition capitalization rate of 4.5%. Further, the company started a $409.7-million development project in Boston during the quarter. On the other hand, the company sold a land parcel in suburban Maryland for about $2.7 million. There was no apartment property sale made by the company in the quarter.
For third-quarter 2018, Equity Residential projects normalized FFO per share at 81-85 cents.
For full-year 2018, the company has revised its guidance and now expects normalized FFO per share of $3.22-$3.28 compared to the prior outlook of $3.17-$3.27. The company’s full-year outlook is backed by same-store portfolio revenue growth of 1.9-2.3%, against the previous projection of 1.0-2.25%, physical occupancy of 96.1%, up from the prior estimate of 96.0% and NOI change of 1.0-1.8%, against the previously issued range of 0.0-1.5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, Equity Residential has a subpar Growth Score of D, however its momentum 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.
The company's stock is suitable solely for momentum based on our styles scores.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Equity Residential has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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