Why Is Equity Residential (EQR) Down 11.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Equity Residential (EQR). Shares have lost about 11.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Equity Residential 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 catalysts.
Equity Residential Q1 FFO and Revenues Miss Estimates
Equity Residential reported first-quarter 2022 normalized FFO per share of 77 cents, missing the Zacks Consensus Estimate of 80 cents.
Rental income came in at $653.3 million, lagging the consensus mark of $658.07 million.
Nonetheless, on a year-over-year basis, normalized FFO per share improved 13.2%, while rental income climbed 9.3%. Normalized FFO grew based on strong lease demand, while same-store revenue witnessed growth driven by strong physical occupancy and improvement in pricing power.
Quarter in Detail
Residential same-store revenues (including 74,675 apartment units) were up 7.8% year over year to $595.3 million, while same-store expenses flared up 2.5% to $203.8 million. As a result, same-store NOI improved 10.8% to $391.6 million.
The average rental rate increased 6.2% year over year to $2,757 during the March-end quarter, while physical occupancy expanded 140 basis points to 96.4% for the same-store portfolio.
In the first quarter, the company purchased a 172-unit apartment property in San Diego for $113.0 million. It did not sell any properties in the said period.
Balance Sheet
Equity Residential exited first-quarter 2022 with cash and cash equivalents of $41.1 million, down from $123.8 million recorded at the end of 2021.
The net debt to normalized EBITDAre was 5.38X compared with 5.61X in the previous quarter.
Outlook
For second-quarter 2022, Equity Residential projects a normalized FFO per share of 82-86 cents.
For 2022, management maintains its previous guidance. Normalized FFO per share is expected in the range of $3.40-$3.50.
Equity Residential’s full-year outlook incorporates a same-store revenue rise of 8-10%, an expense rise of 2.5-3.5% and a NOI improvement of 11-13%. Physical occupancy is expected to be 96.5%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Equity Residential has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 broadly trending downward for the stock, and the magnitude of these revisions has been net zero. 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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