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Why You Should Retain UDR Stock in Your Portfolio Right Now

UDR is likely to capitalize on its diversified portfolio and technological initiatives, though significant exposure to challenged urban residential as...

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This story originally appeared on Zacks

UDR Inc. UDR enjoys 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, limits volatility and concentration risks and helps the company generate steady operating cash flows.

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During the second quarter of 2021, the company continued to witness improvement in traffic, occupancy, rate growth, and collections in all of its markets. Also, the decent pace of vaccinations is enhancing prospects of urban core markets, as the company saw sequential rent growth and occupancy improvement during the June-end quarter.

Concurrent with the earnings release, UDR raised its guidance ranges in light of the continued strength in operating fundamentals, strong pricing power and accretive external growth. This marks the company’s third guidance raise so far in 2021.

Moreover, UDR’s focus on technological initiatives and process enhancements are anticipated to drive margin expansion and long-term profitability. The company’s Next Generation Operating Platform enables it to electronically interact with and provide service to residents and prospects throughout its diversified portfolio. This is likely to give UDR a competitive edge over others.

The company is focused 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, 2021, UDR had $681.1 million of liquidity through a combination of cash and undrawn capacity on its credit facilities. In addition to that, UDR has no consolidated maturities until 2023, excluding principal amortization and amounts on its commercial paper program and credit facility. This places the company well to sail through any negative externalities.

However, significant exposure to challenged urban residential assets, where the flexible working environment is still denting demand, might continue hurting rental rates and occupancy levels.

Also, concession rates are expected to be elevated. Though situations are improving with a rise in occupancy level, the company continues to offer concessions amid a variety of regulatory restrictions.

Shares of this Zacks Rank #3 (Hold) company have underperformed the industry it belongs to in the past six months. Its shares have appreciated 24.8% compared with the industry’s growth of 27.9%.

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Key Industry Picks

The Zacks Consensus Estimate for BRT Apartments Corp.’s BRT 2021 FFO per share has moved up 1.9% upward over the past month. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for RPT Realty’s RPT current-year FFO per share has moved 1.2% north in the past month. The company carries a Zacks Rank of 2 (Buy), at present.

The Zacks Consensus Estimate for Equity Residential’s EQR ongoing-year FFO per share has been revised marginally upward in the past week. The company carries a Zacks Rank of 2, currently.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.



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Equity Residential (EQR): Free Stock Analysis Report

 

United Dominion Realty Trust, Inc. (UDR): Free Stock Analysis Report

 

BRT Apartments Corp. (BRT): Free Stock Analysis Report

 

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