A month has gone by since the last earnings report for UDR (UDR). Shares have added about 2.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is UDR 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.
UDR Misses Q1 FFO Estimates, Suspends Guidance for 2020
UDR’s first-quarter 2020 FFO per share of 53 cents increased 3.9% year over year. However, the figure narrowly missed the Zacks Consensus Estimate of 54 cents.Results reflect year-over-year growth in same-store net operating income (NOI) and weighted average same-store physical occupancy.
First-quarter revenues from rental income climbed 19.5% year over year to $320.1 million. Further, the revenues surpassed the Zacks Consensus Estimate of $310.3 million. The increase reflects growth in revenues from operating and acquisition communities.
UDR has withdrawn its guidance for the ongoing year in light of the coronavirus pandemic. The company also apprised about its April operations. It noted that 98% of residents paid at least a portion of monthly rent, while cash rents received (as a percentage of billed rent) was 95.5%. Moreover, weighted average occupancy in April was 96.6% and effective blended lease rate growth was 2%.
Inside the Headlines
During the first quarter, combined same-store (include the impact of the 11 Joint Venture communities aggregating 3,619 homes that were acquired in 2019) revenues increased 3% year over year. However, same-store expenses flared up 1.7%. Consequently, same-store NOI improved 3.5%. The residential REIT’s weighted average combined same-store physical occupancy expanded 30 basis points (bps), year over year, to 97%. First-quarter annualized-rate of turnover decreased 30 bps to 38.2%.
UDR continued to implement its Next Generation Operating Platform strategy during the reported quarter. This facilitated year-over-year combined same-store controllable operating margin expansion of 60 bps to 84.7% and lowered combined same-store controllable expenses by 1.1% year on year.
During the March-end quarter, the company acquired a 294-home community in Tampa, FL —The Slade at Channelside — for $85.2 million. This 11 year-old community had average monthly revenue per occupied home of $1,898 and occupancy of 92% at the time of the acquisition. Moreover, the company bought a 276-home Developer Capital Program community in suburban Portland, OR — The Arbory — pursuant to its option, for a cash outlay of $53.9 million.
The company’s development pipeline aggregated $278.5 million at the end of the first quarter and was 34% funded. The active pipeline includes three development communities (1 each in Addison, TX, Denver, CO, and Dublin, CA) for a combined total of 878 homes. Currently, the development pipeline is projected to produce a weighted average spread between stabilized yields and current market cap rates of 150-200 bps.
At the end of the reported quarter, the company’s Developer Capital Program investment, including accrued return, totaled $409.1 million.
Balance Sheet Position
As of Apr 30, 2020, the company had $399.8 million outstanding under its revolving credit facility. This leaves $775.2 million of liquidity through a combination of cash and undrawn capacity on its credit facilities. Additionally, its total debt was $4.9 billion as of the same date, with maturities through 2022, aggregating approximately $106 million.
UDR ended the January-March quarter with fixed-rate debt representing 92.8% of its total debt, a total blended interest rate of 3.28% and weighted average years to maturity of 7.1 years.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
Currently, UDR has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. It's no surprise UDR has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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