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Equity Residential (EQR) Up 16.5% YTD: Will It Rise Further?
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Shares of Equity Residential (EQR - Free Report) have rallied 16.5% year to date, outperforming the industry's growth of 9.3%.
This residential REIT boasts a portfolio of high-quality apartment units in some of the key markets of the United States that have an affluent tenant base. Healthy demand for rental units in its markets, portfolio diversification efforts, technology initiatives and a decent financial position bode well for its revenue growth.
Later in July 2024, EQR reported second-quarter 2024 normalized funds from operations (FFO) per share of 97 cents, which surpassed the Zacks Consensus Estimate of 96 cents. Results reflected decent same-store performances, backed by healthy demand and modest supply. The company also raised its 2024 guidance.
For full-year 2024, Equity Residential now expects normalized FFO per share in the band of $3.86-$3.92 compared with the previous guided range of $3.80-$3.90.The rise in guidance was driven by better physical occupancy and blended rate.
Analysts seem bullish on this Zacks Rank #3 (Hold) company. Although for 2024, the Zacks Consensus Estimate for normalized FFO has remained unrevised at $3.88, for 2025, it increased marginally upward over the past month to $4.01.
Image Source: Zacks Investment Research
Let us now decipher the factors behind the surge in the stock price and also check whether this trend will last.
Equity Residential has a dominating presence in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California. The residential REIT is also growing its presence in Denver, CO; Atlanta, GA; Dallas/Ft. Worth and Austin, TX. It is particularly targeting places where affluent renters prefer to live, work and play.
The company’s affluent residents work in the highest earning sectors of the economy and are not rent-burdened, creating the ability to raise rents more readily in good economic times and reducing risk during downturns.
Moreover, given the high cost of homeownership, especially relative to rents, the transition from renter to homeowner is difficult in its markets, making renting apartment units a viable option.
The recent arrangement with Blackstone Group (BX) involves acquiring four properties with 1,357 apartment units in Atlanta, GA, four properties with 1,237 apartment units in Dallas/Ft. Worth, TX, and three properties with 978 apartment units in Denver, CO. This purchase will mark a significant milestone contributing to the company’s diversification efforts and growth plans targeting higher-end renters.
Equity Residential is also banking on technology and organizational capabilities to drive rent growth and improve the efficiency of its operating platform. Such efforts are likely to provide the REIT a competitive edge over others and drive growth in net operating income (NOI) in the upcoming period.
The company is making strategic efforts toward repositioning its portfolio, selling older properties and acquiring newer ones in submarkets with high numbers of affluent renters, favorable long-term demand drivers and manageable forward supply.
In the first half of 2024, EQR acquired one property in Boston. Following the conclusion of the second quarter of 2024, it acquired one property each in Atlanta and Dallas/Ft. Worth.
In the first half of 2024, the company also disposed of five properties. Such efforts are likely to drive EQR’s growth over the long term.
Equity Residential has an encouraging development pipeline. As of Jun 30, 2024, the company had seven projects (consolidated and unconsolidated) under development. Over the next few years, the developments underway are expected to deliver meaningful incremental net operating income (NOI) upon completion and stabilization and are expected to fuel FFO and NAV growth.
Equity Residential has a healthy balance sheet with ample liquidity and financial flexibility. As of Jun 30, 2024, the company had nearly $2.3 billion of liquidity through cash and cash equivalents and the available borrowing capacity on its revolving credit facility.
It has a well-laddered debt maturity schedule with no significant debt maturities until 2025. This will help it pursue growth opportunities and enjoy greater liquidity for day-to-day operations.
Solid dividend payouts remain the biggest attraction for REIT investors and Equity Residential remains committed to this purpose. Per the June Investor Update, for the 2011-2024 period, the company’s dividend is expected to witness a compound annual growth rate of 6%.
However, the elevated supply of apartments in some of Equity Residential’s markets and high interest rates add to the company’s concerns.
The Zacks Consensus Estimate for Centerspace’s current-year FFO per share has been raised marginally over the past month to $4.82.
The Zacks Consensus Estimate for Essex Property Trust’s 2024 FFO per share has moved marginally northward over the past week to $15.53.
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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Equity Residential (EQR) Up 16.5% YTD: Will It Rise Further?
Shares of Equity Residential (EQR - Free Report) have rallied 16.5% year to date, outperforming the industry's growth of 9.3%.
This residential REIT boasts a portfolio of high-quality apartment units in some of the key markets of the United States that have an affluent tenant base. Healthy demand for rental units in its markets, portfolio diversification efforts, technology initiatives and a decent financial position bode well for its revenue growth.
Later in July 2024, EQR reported second-quarter 2024 normalized funds from operations (FFO) per share of 97 cents, which surpassed the Zacks Consensus Estimate of 96 cents. Results reflected decent same-store performances, backed by healthy demand and modest supply. The company also raised its 2024 guidance.
For full-year 2024, Equity Residential now expects normalized FFO per share in the band of $3.86-$3.92 compared with the previous guided range of $3.80-$3.90.The rise in guidance was driven by better physical occupancy and blended rate.
Analysts seem bullish on this Zacks Rank #3 (Hold) company. Although for 2024, the Zacks Consensus Estimate for normalized FFO has remained unrevised at $3.88, for 2025, it increased marginally upward over the past month to $4.01.
Image Source: Zacks Investment Research
Let us now decipher the factors behind the surge in the stock price and also check whether this trend will last.
Equity Residential has a dominating presence in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California. The residential REIT is also growing its presence in Denver, CO; Atlanta, GA; Dallas/Ft. Worth and Austin, TX. It is particularly targeting places where affluent renters prefer to live, work and play.
The company’s affluent residents work in the highest earning sectors of the economy and are not rent-burdened, creating the ability to raise rents more readily in good economic times and reducing risk during downturns.
Moreover, given the high cost of homeownership, especially relative to rents, the transition from renter to homeowner is difficult in its markets, making renting apartment units a viable option.
The recent arrangement with Blackstone Group (BX) involves acquiring four properties with 1,357 apartment units in Atlanta, GA, four properties with 1,237 apartment units in Dallas/Ft. Worth, TX, and three properties with 978 apartment units in Denver, CO. This purchase will mark a significant milestone contributing to the company’s diversification efforts and growth plans targeting higher-end renters.
Equity Residential is also banking on technology and organizational capabilities to drive rent growth and improve the efficiency of its operating platform. Such efforts are likely to provide the REIT a competitive edge over others and drive growth in net operating income (NOI) in the upcoming period.
The company is making strategic efforts toward repositioning its portfolio, selling older properties and acquiring newer ones in submarkets with high numbers of affluent renters, favorable long-term demand drivers and manageable forward supply.
In the first half of 2024, EQR acquired one property in Boston. Following the conclusion of the second quarter of 2024, it acquired one property each in Atlanta and Dallas/Ft. Worth.
In the first half of 2024, the company also disposed of five properties. Such efforts are likely to drive EQR’s growth over the long term.
Equity Residential has an encouraging development pipeline. As of Jun 30, 2024, the company had seven projects (consolidated and unconsolidated) under development. Over the next few years, the developments underway are expected to deliver meaningful incremental net operating income (NOI) upon completion and stabilization and are expected to fuel FFO and NAV growth.
Equity Residential has a healthy balance sheet with ample liquidity and financial flexibility. As of Jun 30, 2024, the company had nearly $2.3 billion of liquidity through cash and cash equivalents and the available borrowing capacity on its revolving credit facility.
It has a well-laddered debt maturity schedule with no significant debt maturities until 2025. This will help it pursue growth opportunities and enjoy greater liquidity for day-to-day operations.
Solid dividend payouts remain the biggest attraction for REIT investors and Equity Residential remains committed to this purpose. Per the June Investor Update, for the 2011-2024 period, the company’s dividend is expected to witness a compound annual growth rate of 6%.
However, the elevated supply of apartments in some of Equity Residential’s markets and high interest rates add to the company’s concerns.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Centerspace (CSR - Free Report) and Essex Property Trust, Inc. (ESS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Centerspace’s current-year FFO per share has been raised marginally over the past month to $4.82.
The Zacks Consensus Estimate for Essex Property Trust’s 2024 FFO per share has moved marginally northward over the past week to $15.53.
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.