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Equity Residential (EQR) Q2 FFO Tops, Revenues Miss Estimates
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Equity Residential’s (EQR - Free Report) second-quarter 2020 normalized funds from operations (FFO) per share of 86 cents surpassed the Zacks Consensus Estimate of 83 cents. The reported figure remained flat, year over year.
Results reflect a decline in same-store expenses on impressive expense control and continued enhancements in its operating platform. Moreover, resident retention was the highest for the second quarter in Equity Residential’s history.
However, total revenues in the second quarter came in at $653.5 million, down about 2.4% year on year. The revenue figure also missed the Zacks Consensus Estimate of $656.7 million.
Management noted, “We see good demand for our apartments, both urban and suburban, but with increased customer price sensitivity, especially in the urban cores of New York, San Francisco and Boston.”
The company also stated that it started witnessing a recovery in demand in late May, while initial leads, traffic and applications continue to be in line with the prior-year period. Further, the residential REIT collected an average 97% of its total monthly residential rental income in the second quarter, while July collections are trending at a similar pace to previous months.
Quarter in Detail
Same-store revenues (includes 74,843 apartment units) edged down 0.9% year over year to $608.7 million, while expenses slipped 0.1% to $184.8 million. As a result, same-store net operating income (NOI) declined 1.2% to $423.9 million, year on year.
Average rental rate inched up 0.8% year on year to $2,860 during the June-end quarter, while physical occupancy contracted 160 basis points to 94.9% for the same-store portfolio.
Balance Sheet
Equity Residential exited second-quarter 2020 with cash and cash equivalents of $187.4 million, up from the $82.3 million recorded at the end of the first quarter. As of Jul 28, 2020, the company had no outstanding balances under its revolving credit facility or commercial paper program and had $2.4 billion in available liquidity.
Portfolio Activity
During the reported quarter, the company sold two apartment properties for $384.2 million at a weighted average Disposition Yield of 4.4%. The properties are located in the San Francisco Bay Area and the Washington, DC area. These properties had 655 apartment units in total.
In Conclusion
Equity Residential is well poised to benefit from its rental properties focused in urban and high-density suburban coastal gateway markets, a healthy balance sheet, and technological initiatives. However, leasing activity and tenants’ rent-paying capability will continue to be affected by the pandemic’s impact on the economy and jobs.
Per its preliminary July residential same-store operating update, new lease change was down 8.3% in the month compared with the second-quarter decline of 7%, while renewal rate fell 0.9% compared with the 0.7% increase for the quarter. Blended rate too was down 4.5% compared with the June-end quarter’s decline of 2.7%.
Nevertheless, physical occupancy was 95% in July compared with the 94.9% for the April-June quarter, while concession use has been higher this month than in June.
Equity Residential currently carries a Zacks Rank #4 (Sell).
Equity Residential Price, Consensus and EPS Surprise
We now look forward to the earnings releases of other REITs like Digital Realty Trust, Inc. (DLR - Free Report) , American Tower Corporation (AMT - Free Report) and Host Hotels & Resorts, Inc. (HST - Free Report) . All three companies are scheduled to release quarterly numbers on Jul 30.
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) Q2 FFO Tops, Revenues Miss Estimates
Equity Residential’s (EQR - Free Report) second-quarter 2020 normalized funds from operations (FFO) per share of 86 cents surpassed the Zacks Consensus Estimate of 83 cents. The reported figure remained flat, year over year.
Results reflect a decline in same-store expenses on impressive expense control and continued enhancements in its operating platform. Moreover, resident retention was the highest for the second quarter in Equity Residential’s history.
However, total revenues in the second quarter came in at $653.5 million, down about 2.4% year on year. The revenue figure also missed the Zacks Consensus Estimate of $656.7 million.
Management noted, “We see good demand for our apartments, both urban and suburban, but with increased customer price sensitivity, especially in the urban cores of New York, San Francisco and Boston.”
The company also stated that it started witnessing a recovery in demand in late May, while initial leads, traffic and applications continue to be in line with the prior-year period. Further, the residential REIT collected an average 97% of its total monthly residential rental income in the second quarter, while July collections are trending at a similar pace to previous months.
Quarter in Detail
Same-store revenues (includes 74,843 apartment units) edged down 0.9% year over year to $608.7 million, while expenses slipped 0.1% to $184.8 million. As a result, same-store net operating income (NOI) declined 1.2% to $423.9 million, year on year.
Average rental rate inched up 0.8% year on year to $2,860 during the June-end quarter, while physical occupancy contracted 160 basis points to 94.9% for the same-store portfolio.
Balance Sheet
Equity Residential exited second-quarter 2020 with cash and cash equivalents of $187.4 million, up from the $82.3 million recorded at the end of the first quarter. As of Jul 28, 2020, the company had no outstanding balances under its revolving credit facility or commercial paper program and had $2.4 billion in available liquidity.
Portfolio Activity
During the reported quarter, the company sold two apartment properties for $384.2 million at a weighted average Disposition Yield of 4.4%. The properties are located in the San Francisco Bay Area and the Washington, DC area. These properties had 655 apartment units in total.
In Conclusion
Equity Residential is well poised to benefit from its rental properties focused in urban and high-density suburban coastal gateway markets, a healthy balance sheet, and technological initiatives. However, leasing activity and tenants’ rent-paying capability will continue to be affected by the pandemic’s impact on the economy and jobs.
Per its preliminary July residential same-store operating update, new lease change was down 8.3% in the month compared with the second-quarter decline of 7%, while renewal rate fell 0.9% compared with the 0.7% increase for the quarter. Blended rate too was down 4.5% compared with the June-end quarter’s decline of 2.7%.
Nevertheless, physical occupancy was 95% in July compared with the 94.9% for the April-June quarter, while concession use has been higher this month than in June.
Equity Residential currently carries a Zacks Rank #4 (Sell).
Equity Residential Price, Consensus and EPS Surprise
Equity Residential price-consensus-eps-surprise-chart | Equity Residential Quote
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We now look forward to the earnings releases of other REITs like Digital Realty Trust, Inc. (DLR - Free Report) , American Tower Corporation (AMT - Free Report) and Host Hotels & Resorts, Inc. (HST - Free Report) . All three companies are scheduled to release quarterly numbers on Jul 30.
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.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained an impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>