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What's in Store for Mid-America Apartment (MAA) in Q2 Earnings?
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Mid-America Apartment Communities (MAA - Free Report) — commonly known as MAA — is a real estate investment trust (REIT) that focuses on owning, operating and acquiring apartment communities throughout the southeast, southwest and mid-Atlantic regions of the United States. MAA is slated to report second-quarter 2024 results on Jul 31 after market close.
The Germantown, TN-based residential REIT came up with a core FFO per share of $2.22 in the last reported quarter, which missed the Zacks Consensus Estimate of $2.23. Although this residential REIT experienced growth in the average effective rent per unit for the same-store portfolio, its quarterly results reflected a fall in the occupancy level and high supply across its markets. The company also experienced an increase in operating expenses, real estate taxes and insurance and interest expenses year over year.
Over the trailing four quarters, MAA surpassed the Zacks Consensus Estimate on three occasions and missed once, the average beat being 0.33%. This is depicted in the chart below:
Mid-America Apartment Communities, Inc. Price and EPS Surprise
Let’s see how things have shaped up before this announcement.
US Apartment Market in Q2
Per RealPage data, the U.S. apartment market witnessed a surge in demand in the second quarter despite supply continuing to grab headlines.
This is evidenced by high absorption rates. Around 389,629 apartment units were absorbed on net over the past 12 months, with some 257,000 units being absorbed during the first two quarters of 2024. However, there were massive amounts of new supply, with 522,743 new market-rate apartment units delivered in the past 12 months.
With the narrow gap between demand and supply, national occupancy and rent growth rates have stabilized. Occupancy held steady for three straight months, remaining at 94.2% in June. Rents rose 0.2% in the year ending June, and the monthly effective rent change was north 0.4%. The average effective rent was $1,838.
Projections
MAA has a well-diversified Sunbelt portfolio, which is poised to benefit from healthy demand in its markets. The Sunbelt region is drawing attention for being business-friendly, lower-taxed and having low-density cities. Hence, this region is experiencing job growth and continued in-migration, which is driving demand for rental units. MAA has also been investing in its existing properties to attract new tenants and retain current ones. The company has been upgrading its amenities and technology to meet the evolving needs of renters.
Moreover, MAA continues to implement its three internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs are expected to help the company capture the upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base.
However, the struggle to lure renters is expected to have persisted in the second quarter as supply volumes are likely to have remained elevated in many Sunbelt markets. This is likely to have affected the company’s power to raise the rent or increase occupancy.
Moreover, a high interest rate environment is a concern for MAA. Elevated rates imply a high borrowing cost for the company, which is likely to have affected its ability to purchase or develop real estate. For the second quarter of 2024, our estimate indicates a 16.9% year-over-year increase in the company’s interest expenses.
For the second quarter, we expect same-store property net operating income to fall 0.1% year over year. Meanwhile, we project an average physical occupancy of 95.5%, up 20 basis points from the prior quarter.
Per the June investor presentation, since the beginning of the second quarter through May 30, 2024, the company’s average daily physical occupancy was 95.5%, up from 95.3% in the first quarter of 2024.
For the same period, the same-store effective lease-over-lease average pricing growth for new leases was a decline of 5.3% compared with a fall of 6.2% for the first quarter. For renewals, it was up 5.0%, the same as in the first quarter. Consequently, the blended lease rate rose 0.1% for the said period compared to a 0.6% fall in the first quarter.
The Zacks Consensus Estimate for quarterly revenues is pegged at $544.9 million. This suggests a 1.82% rise from the year-ago quarter’s reported figure.
MAA projected second-quarter 2024 core FFO per share in the band of $2.11-$2.27, with $2.19 at the midpoint.
Before the second-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been unrevised at $2.20 in the past month. This also suggests a year-over-year decline of 3.51%.
Here is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for MAA this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
MAA currently carries a Zacks Rank of 3 and 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.
Stocks That Warrant a Look
Here are two stocks from the residential REIT sector — Essex Property Trust, Inc. (ESS - Free Report) and American Homes 4 Rent (AMH - 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.
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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What's in Store for Mid-America Apartment (MAA) in Q2 Earnings?
Mid-America Apartment Communities (MAA - Free Report) — commonly known as MAA — is a real estate investment trust (REIT) that focuses on owning, operating and acquiring apartment communities throughout the southeast, southwest and mid-Atlantic regions of the United States. MAA is slated to report second-quarter 2024 results on Jul 31 after market close.
The Germantown, TN-based residential REIT came up with a core FFO per share of $2.22 in the last reported quarter, which missed the Zacks Consensus Estimate of $2.23. Although this residential REIT experienced growth in the average effective rent per unit for the same-store portfolio, its quarterly results reflected a fall in the occupancy level and high supply across its markets. The company also experienced an increase in operating expenses, real estate taxes and insurance and interest expenses year over year.
Over the trailing four quarters, MAA surpassed the Zacks Consensus Estimate on three occasions and missed once, the average beat being 0.33%. This is depicted in the chart below:
Mid-America Apartment Communities, Inc. Price and EPS Surprise
Mid-America Apartment Communities, Inc. price-eps-surprise | Mid-America Apartment Communities, Inc. Quote
Let’s see how things have shaped up before this announcement.
US Apartment Market in Q2
Per RealPage data, the U.S. apartment market witnessed a surge in demand in the second quarter despite supply continuing to grab headlines.
This is evidenced by high absorption rates. Around 389,629 apartment units were absorbed on net over the past 12 months, with some 257,000 units being absorbed during the first two quarters of 2024. However, there were massive amounts of new supply, with 522,743 new market-rate apartment units delivered in the past 12 months.
With the narrow gap between demand and supply, national occupancy and rent growth rates have stabilized. Occupancy held steady for three straight months, remaining at 94.2% in June. Rents rose 0.2% in the year ending June, and the monthly effective rent change was north 0.4%. The average effective rent was $1,838.
Projections
MAA has a well-diversified Sunbelt portfolio, which is poised to benefit from healthy demand in its markets. The Sunbelt region is drawing attention for being business-friendly, lower-taxed and having low-density cities. Hence, this region is experiencing job growth and continued in-migration, which is driving demand for rental units. MAA has also been investing in its existing properties to attract new tenants and retain current ones. The company has been upgrading its amenities and technology to meet the evolving needs of renters.
Moreover, MAA continues to implement its three internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs are expected to help the company capture the upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base.
However, the struggle to lure renters is expected to have persisted in the second quarter as supply volumes are likely to have remained elevated in many Sunbelt markets. This is likely to have affected the company’s power to raise the rent or increase occupancy.
Moreover, a high interest rate environment is a concern for MAA. Elevated rates imply a high borrowing cost for the company, which is likely to have affected its ability to purchase or develop real estate. For the second quarter of 2024, our estimate indicates a 16.9% year-over-year increase in the company’s interest expenses.
For the second quarter, we expect same-store property net operating income to fall 0.1% year over year. Meanwhile, we project an average physical occupancy of 95.5%, up 20 basis points from the prior quarter.
Per the June investor presentation, since the beginning of the second quarter through May 30, 2024, the company’s average daily physical occupancy was 95.5%, up from 95.3% in the first quarter of 2024.
For the same period, the same-store effective lease-over-lease average pricing growth for new leases was a decline of 5.3% compared with a fall of 6.2% for the first quarter. For renewals, it was up 5.0%, the same as in the first quarter. Consequently, the blended lease rate rose 0.1% for the said period compared to a 0.6% fall in the first quarter.
The Zacks Consensus Estimate for quarterly revenues is pegged at $544.9 million. This suggests a 1.82% rise from the year-ago quarter’s reported figure.
MAA projected second-quarter 2024 core FFO per share in the band of $2.11-$2.27, with $2.19 at the midpoint.
Before the second-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been unrevised at $2.20 in the past month. This also suggests a year-over-year decline of 3.51%.
Here is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for MAA this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
MAA currently carries a Zacks Rank of 3 and 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.
Stocks That Warrant a Look
Here are two stocks from the residential REIT sector — Essex Property Trust, Inc. (ESS - Free Report) and American Homes 4 Rent (AMH - 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 is scheduled to report quarterly numbers on Jul 30. ESS has an Earnings ESP of +1.00% and a Zacks Rank of 2 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Homes 4 Rent is slated to report quarterly numbers on Aug 1. AMH has an Earnings ESP of +1.14% and carries a Zacks Rank of 3 presently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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.