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UDR Rallies 18.2% in 6 months: Will the Trend Continue?
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Shares of UDR Inc. (UDR - Free Report) have risen 18.2% in the past six months compared with the industry's upside of 15.9%.
Last month, UDR reported its second-quarter 2024 funds from operations as adjusted (FFOA) per share of 62 cents, which surpassed the Zacks Consensus Estimate of 61 cents.
The quarterly results reflected an increase in revenues from same-store communities. UDR also raised its full-year 2024 guidance.
Analysts also seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 FFO per share revised upward marginally over the past week to $2.46.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price and check whether this trend will last or not.
UDR has a geographically diversified portfolio with a superior product mix of A/B quality properties throughout the United States in coastal and Sunbelt locations, with a mix of 31% urban and 69% suburban communities. This diversified portfolio saves the company from concentration and volatility risks, providing steady rental cash flows.
In UDR’s market, the cost of home ownership is high due to elevated interest rates, making renting apartments an affordable option. Moreover, the demographic trend in its markets is dominated by the young adult age cohort, who prefer renting over ownership, given the flexibility and locational advantage it offers. These factors are expected to drive the demand for apartment rental units in the upcoming period, poising the company well for growth.
The company is leveraging technological initiatives and process enhancements to bring about operational resiliency across its platform. Such efforts are likely to give UDR a competitive edge over others and enable it to capture additional net operating income (NOI), driving long-term profitability.
The company focuses on maintaining an investment-grade balance sheet and ample liquidity to support operational efficiency and dividend growth. As of Jun 30, 2024, UDR had $946.2 million of liquidity. The company’s total indebtedness as of Jun 30, 2024 was $5.8 billion, with only $290.3 million maturing through 2025. At the end of the second quarter of 2024, the net debt-to-EBITDAre was 5.7X. The company’s debt maturity schedule is well-laddered, with weighted average years to maturity of 5.2 years and a weighted average interest rate of 3.38%.Also, 86.4% of its NOI is unencumbered, providing scope for tapping the additional secured debt capital if required.
However, the elevated supply of rental units in some of UDR’s markets and competition from alternative housing options are likely to weigh on its pricing power. High interest rates add to the company’s woes.
The Zacks Consensus Estimate for Essex Property Trust’s 2024 FFO per share is pegged at $4.82, up 3.26% year over year.
The Zacks Consensus Estimate for Cousins Properties' 2024 FFO per share is pegged at $2.66, up 1.53% year over year.
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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UDR Rallies 18.2% in 6 months: Will the Trend Continue?
Shares of UDR Inc. (UDR - Free Report) have risen 18.2% in the past six months compared with the industry's upside of 15.9%.
Last month, UDR reported its second-quarter 2024 funds from operations as adjusted (FFOA) per share of 62 cents, which surpassed the Zacks Consensus Estimate of 61 cents.
The quarterly results reflected an increase in revenues from same-store communities. UDR also raised its full-year 2024 guidance.
Analysts also seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 FFO per share revised upward marginally over the past week to $2.46.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price and check whether this trend will last or not.
UDR has a geographically diversified portfolio with a superior product mix of A/B quality properties throughout the United States in coastal and Sunbelt locations, with a mix of 31% urban and 69% suburban communities. This diversified portfolio saves the company from concentration and volatility risks, providing steady rental cash flows.
In UDR’s market, the cost of home ownership is high due to elevated interest rates, making renting apartments an affordable option. Moreover, the demographic trend in its markets is dominated by the young adult age cohort, who prefer renting over ownership, given the flexibility and locational advantage it offers. These factors are expected to drive the demand for apartment rental units in the upcoming period, poising the company well for growth.
The company is leveraging technological initiatives and process enhancements to bring about operational resiliency across its platform. Such efforts are likely to give UDR a competitive edge over others and enable it to capture additional net operating income (NOI), driving long-term profitability.
The company focuses on maintaining an investment-grade balance sheet and ample liquidity to support operational efficiency and dividend growth. As of Jun 30, 2024, UDR had $946.2 million of liquidity. The company’s total indebtedness as of Jun 30, 2024 was $5.8 billion, with only $290.3 million maturing through 2025. At the end of the second quarter of 2024, the net debt-to-EBITDAre was 5.7X. The company’s debt maturity schedule is well-laddered, with weighted average years to maturity of 5.2 years and a weighted average interest rate of 3.38%.Also, 86.4% of its NOI is unencumbered, providing scope for tapping the additional secured debt capital if required.
However, the elevated supply of rental units in some of UDR’s markets and competition from alternative housing options are likely to weigh on its pricing power. High interest rates add to the company’s woes.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Essex Property Trust (ESS - Free Report) and Cousins Properties (CUZ - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Essex Property Trust’s 2024 FFO per share is pegged at $4.82, up 3.26% year over year.
The Zacks Consensus Estimate for Cousins Properties' 2024 FFO per share is pegged at $2.66, up 1.53% year over year.
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.