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Is it Wise to Hold UDR Stock in Your Portfolio Right Now?

Zacks Equity Research
·4 min read

UDR Inc. UDR has a geographically-diverse portfolio with a superior product-mix of A/B quality properties in urban and sub-urban markets. The company’s portfolio includes properties throughout the United States, including both coastal and sunbelt locations.This strategy of maintaining a diversified portfolio across various geographies and price points helps the company generate steady operating cash flows.

Further, UDR is banking on its technology and scale as well as organizational capabilities to drive growth and margin. The company’s Next Generation Operating Platform enables it to electronically interact with and provide service to residents and prospects throughout diversified portfolio. Also, this has become all the more essential in the present scenario of social-distancing measures, as the virus outbreak needed a quick shift to virtual operations for the continuity of business operations. This is likely to give UDR a competitive edge over others.

Also, the company focuses on its strategic priorities such as disciplined capital allocation, maintaining an investment-grade balance sheet, as well as cash-flow enhancement to support operational efficiency and dividend growth. As of Jun 30, 2020, UDR had $973.7 million of liquidity through a combination of cash and undrawn capacity on its credit facilities, along with roughly $105 million of incremental capital sources from potential settlement of forward equity sales agreements. Aiding its balance-sheet strength, 84% of UDR’s real estate owned based on gross book value is unencumbered as of Jun 30, 2020. This places the company well to sail through these uncertain times.

However, the pandemic-induced uncertainties and the choppy job-market environment will likely hurt demand, resulting in household contraction and consolidation. Apart from these, a number of factors are affecting rental demand, including the work-from-home wave that is resulting in a shift of renter demand away from higher cost and urban/infill markets.

Moreover, the rent-paying capability of tenants has been affected. Given the magnitude of the economic downturn, as well as extended eviction moratoriums, additional rent deferrals, payment plans, lease concessions, waiving late payment fees, the company’s cash flows will likely be hurt.

In addition, the trend in estimate revision for 2020 funds from operations (FFO) per share does not indicate a favorable outlook for UDR as it moved marginally downward over the past month. Therefore, given the above-mentioned concerns and downward estimate revisions, the stock has limited upside potential for the near term.

Shares of this Zacks Rank #3 (Hold) company have underperformed the industry it belongs to in the past year.

During this period, its shares have depreciated 28.4% compared with the industry’s decline of 20.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Preferred Apartment Communities, Inc. APTS FFO per share estimate for 2020 moved up marginally to $1.05 over the past two month. The stock currently carries a Zacks Rank of 2 (Buy).

Cousins Properties Incorporated’s CUZ Zacks Consensus Estimate for the ongoing-year FFO per share moved 1.1% north to $ 2.77 over the past month. The stock currently carries a Zacks Rank of 2.

Duke Realty Corporation’s DRE FFO per share estimate for the current year moved 3.5% upward to $1.49 in the past month. The stock currently carries 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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Duke Realty Corporation (DRE) : Free Stock Analysis Report
 
United Dominion Realty Trust, Inc. (UDR) : Free Stock Analysis Report
 
Cousins Properties Incorporated (CUZ) : Free Stock Analysis Report
 
Preferred Apartment Communities, Inc. (APTS) : Free Stock Analysis Report
 
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