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What's in Store for Equity Residential (EQR) in Q3 Earnings?

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Equity Residential (EQR - Free Report) is slated to report third-quarter 2022 earnings on Oct 25 after the closing bell. The company’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Chicago, IL-based residential real estate investment trust (REIT) reported a surprise of 4.71% in terms of FFO per share. Results reflected strong physical occupancy and sustained growth in pricing power.

Over the trailing four quarters, Equity Residential surpassed the Zacks Consensus Estimate on three occasions and missed the same on the other, the average surprise being 1.53%. The graph below depicts this surprise history:

Equity Residential Price and EPS Surprise

Equity Residential Price and EPS Surprise

Equity Residential price-eps-surprise | Equity Residential Quote

Let’s see how things have shaped up for EQR before this announcement.

Key Factors

For the U.S. apartment market, demand remained healthy initially in the third quarter, though normal seasonality returned in September.  

Amid this, Equity Residential is expected to have benefited from its portfolio diversification in the urban and suburban markets. With healthy demand, EQR is expected to have experienced solid leasing and renewal activity and a favorable pricing position in the third quarter. It has a healthy balance sheet and banks on technology, scale and organizational capabilities to drive growth.

Per Equity Residential’s August-end released operating update, the company concluded a strong leasing season, driven by healthy demand and pricing for its apartment units. As a result, EQR noted that its same-store revenue growth is on track to either match or surpass the midpoint of its guidance range mentioned in its second-quarter 2022 earnings release.

Looking at some of Equity Residential’s same-store residential operating trends, we notice that the physical occupancy remained high through June and July at 96.7% and 96.5%, respectively. The preliminary physical occupancy rate for August was 96.6%.

The percentage of residents renewing by month remained more than 50% in June, July and August. The same in June was recorded at 55%, while in July and August, it remained steady at 52%. The blended rate in June came in at 14.3% and started to decline from then onward. In July, the figure fell to 12.8% and declined to 11.8% in August.

Considering normal seasonal demand patterns, the rents for the year peaked earlier this August. Management expected rents to start moderating from here onward for the remainder of 2022.

Currently, the Zacks Consensus Estimate for the company’s quarterly revenues stands at $693.6 million, indicating an 11.3% increase year over year. The consensus estimate for total same-store revenues is currently pegged at $655.4 million, indicating growth from $645.8 million in the prior quarter.

The consensus estimate for physical occupancy is presently pegged at 96.45% for the third quarter, marginally up from 96.40% in the prior quarter.

Moreover, analysts seem to have become optimistic about the company’s third-quarter performance. The Zacks Consensus Estimate for the July-September quarter’s FFO per share has moved a cent up to 91 cents over the past month. It also suggests a year-over-year increase of nearly 18.2%.

For the third quarter of 2022, Equity Residential projected normalized FFO per share in the band of 89-93 cents.

Here Is What Our Quantitative Model Predicts

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

Earnings ESP: EQR has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Equity Residential currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are three stocks from the residential REIT sector — Essex Property Trust, Inc. (ESS - Free Report) , Mid-America Apartment Communities, Inc. (MAA - Free Report) and UDR, Inc. (UDR - Free Report) — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

Essex Property Trust, slated to release third-quarter earnings on Oct 26, has an Earnings ESP of +0.11% and a Zacks Rank of 3 at present.

Mid-America Apartment Communities, scheduled to report quarterly figures on Oct 26, has an Earnings ESP of +1.31% and a Zacks Rank of 3 currently.

UDR, slated to report quarterly numbers on Oct 26, has an Earnings ESP of +0.57% and carries a Zacks Rank of 2 (Buy).

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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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