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What's in Cards for Mid-America Apartment's (MAA) Q3 Earnings?

Mid-America Apartment's (MAA) Q3 results will likely reflect the improving demand for its apartment units on solid rebound in the residential real estate market.

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This story originally appeared on Zacks

Mid-America Apartment Communities, Inc. MAA — commonly known as MAA — is slated to report third-quarter 2021 results on Oct 27, after market close. The company’s quarterly results will likely highlight growth in revenues and funds from operations (FFO) per share.

- Zacks

The Germantown, TN-based residential real estate investment trust (REIT) delivered a surprise of 3.05% in terms of FFO per share in the last reported quarter. The quarterly results were driven by an increase in average effective rent per unit for the same-store portfolio.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on all occasions, the average beat being 2.03%. This is depicted in the chart below:

MidAmerica Apartment Communities, Inc. Price and EPS Surprise

Let’s see how things have shaped up for the announcement.

Factors to Consider

For the U.S. apartment market, the third quarter appeared to be robust, with renter demand scaling record height. The number of occupied apartments in the nation climbed 255,094 units to 597,354 units, per a report from the real estate technology and analytics firm RealPage, aided by strong leasing in the luxury Class A projects. This marked the biggest quarterly upsurge observed in the RealPage, Inc. database. The rising home prices and limited inventory levels in the for-sale sector, which are making it difficult for the conversion of renters to homebuyers, are other growth drivers.

After living with parents during the initial days of the pandemic, young adults are now forming new households. A better job market, particularly for the high-paying employment sectors than in the low-wage positions, is spurring demand for luxury units. In addition, rising home prices and limited inventory levels in the for-sale sector are hindering the conversions to homeownership and stoking rental housing demand. In terms of markets, product absorption continued in the Sun Belt and other non-gateway metros. What’s grabbing attention is the large product absorption in the gateway metros, reflecting healthy rental demand.

The current favorable environment is boosting the occupancy levels and in turn, pushing up rents. Rent growth has also been widespread.

MAA’s Sun Belt portfolio is likely to have benefited amid these. The pandemic has accelerated employment shifts and population inflow into the company’s markets, thereby enhancing the desirability of its markets. Healthy demand for MAA’s well-positioned Sunbelt properties is anticipated to have positively impacted the company during the third quarter.

The residential REIT has been focusing on redevelopment initiatives and smart-home installations. In the to-be-reported quarter, the company is likely to have continued to enjoy higher rents at its redeveloped properties.

Per management’s September investor conference presentation, the average blended pricing growth for leases compared with the prior lease at the company’s same-store portfolio improved to 14.3% in August, from the 8.2% reported in the second quarter. As of August 2021, the average physical occupancy for the same-store portfolio was 96.4%, in line with the previous quarter.

The Zacks Consensus Estimate for quarterly revenues is pegged at $444.7 million, suggesting a year-over-year rise of 5.1%. The same-store revenues are projected at $429 million, indicating a 2.9% increase from the prior-year quarter.

During the third quarter, the company is likely to have enjoyed a robust balance-sheet position, with low leverage and ample liquidity.

MAA expects the third-quarter core FFO in the range of $1.62-$1.74 per share.

Prior to the third-quarter earnings release, the Zacks Consensus Estimate for the quarterly FFO per share has been revised 1.2% upward to $1.70 over the past month. This calls for year-over year growth of 8.3%.

However, elevated supply might have put pressure on the rental rates and affected the revenue growth tempo during the reported quarter.

Here is what our quantitative model predicts:

MAA does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of a FFO beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

MAA currently carries a Zacks Rank #2 (Buy) and has an Earnings ESP of -0.24%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are some stocks in the REIT sector you may want to consider, as our model shows that these have the right combination of elements to report a surprise for the third quarter:

Essex Property Trust, Inc. ESS, set to release quarterly numbers on Oct 26, has an Earnings ESP of +0.27% and carries a Zacks Rank of 2, at present.

Equity Residential EQR, scheduled to report third-quarter earnings on Oct 26, currently has an Earnings ESP of +1.19% and carries a Zacks Rank of 3.

Camden Property Trust CPT, slated to announce third-quarter 2021 earnings on Oct 28, currently carries a Zacks Rank of #3 and has an Earnings ESP of +0.43%.

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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