Why Is Mid-America Apartment Communities (MAA) Up 4.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Mid-America Apartment Communities (MAA). Shares have added about 4.1% in that time frame, outperforming the S&P 500.

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

Mid-America Apartment Tops Q3 FFO & Revenue Estimates

MAA reported third-quarter 2018 FFO of $1.50 per share, in line with the Zacks Consensus Estimate. Further, the figure remained unchanged as compared to the prior-year tally.

This residential REIT’s quarterly results reflect growth in same-store NOI and rise in average effective rent per unit for the same-store portfolio.

Rental and other property revenues came in at $397.1 million in the quarter, 3.3% higher than the prior-year tally. Further, it surpassed the Zacks Consensus Estimate of $395.5 million.

Quarter in Detail

During the reported quarter, the company’s same-store NOI increased to $224.3 million, registering 1.9% year-over-year growth. The same-store portfolio revenues increased 2% as a result of year-over-year increase in average effective unit of 2.1%. Moreover, average physical occupancy for the same-store portfolio was 96%, reflecting a contraction of 10 basis points from the year-earlier quarter.

As of Sep 30, 2018, MAA held cash and cash equivalents of nearly $46.1 million, significantly up from approximately $10.8 million as of Dec 31, 2017. Furthermore, as of the same date, around $674.3 million of combined cash and capacity were available under its unsecured revolving credit facility.

The Post Properties Merger

During third-quarter 2018, MAA incurred a total of 2 cents per share of merger and integration costs. Notably, the company expects full consolidation of MAA and Post Properties to be accomplished later this year.

Additionally, MAA continues to project synergies of around $20 million in gross overhead costs to be realized from this merger.

Portfolio Activity

During the quarter under review, MAA purchased 7,500 square feet of multi-tenant retail space at the company’s Hue apartment community in Raleigh, NC. The company had previously purchased apartment space at the community in 2010.

During the Jul-Sep period, it also sold a seven-acre land parcel in Atlanta, GA, for $1.8 million.

During the nine-month period ended Sep 30, 2018, MAA completed the renovation of 6,549 units under its redevelopment program. Notably, it attained an increase in the average rental rate of 10.6%, above non-renovated units.

At the end of the Sep-end quarter, MAA had four development community projects under construction, consisting of 717 units, with total projected cost of $148 million. Notably, an estimated $102.3 million remained to be funded as of Jun 30, 2018.

Outlook

MAA narrowed its guidance for 2018 FFO per share and expects it to be in the range of $5.99-$6.11, up from the previous band of $5.96-$6.16.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Mid-America Apartment Communities has an average Growth Score of C, though it is lagging a bit 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

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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