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Equity Residential Stock Rises 20.8% YTD: Will the Trend Continue?
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Shares of Equity Residential (EQR - Free Report) have risen 20.8% year to date, outperforming the industry's growth of 12.3%.
In September 2024, EQR reported that it witnessed healthy demand and pricing for its apartment units during its primary leasing season. The company reiterated its earlier guidance of blended rate growth between 2% and 3% for the third quarter of 2024 and a physical occupancy level of 96.2% for the full-year 2024. It added that its same-store revenue growth will be able to meet its previous guided range as per its second-quarter earnings release.
Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 normalized funds from operations (FFO) per share being raised marginally upward over the past two months to $3.89.
Image Source: Zacks Investment Research
Factors Behind EQR Stock Price Surge: Will the Trend Last?
Core Business Strength: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 targeting places where affluent renters prefer to live, work and play and are not rent-burdened, creating the ability to raise rents more readily in good economic times and reducing risk during downturns.
In August 2024, EQR entered into an arrangement with Blackstone Group to acquire four properties in Atlanta, GA, four properties in Dallas/Ft. Worth, TX, and three properties in Denver, CO. This purchase marks a significant milestone in contributing to the company’s diversification efforts and growth plans targeting higher-end renters.
EQR 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.
EQR 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 relieve pressure on its balance sheet and drive growth over the long term.
EQR has an encouraging development pipeline. As of June 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 NOI upon completion and stabilization and are expected to fuel FFO and net asset value (NAV) growth.
Balance Sheet Strength:EQR has a healthy balance sheet with ample liquidity and financial flexibility. As of June 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. The company ended the second quarter of 2024 with a net debt to normalized EBITDAre of 3.92X. Unencumbered NOI as a percentage of the total NOI was 89.6% in the quarter, providing it financial flexibility and access to the debt market at favorable terms.
Dividend Payouts: Solid dividend payouts remain the biggest attraction for REIT investors, and EQR 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%. Given the company’s solid operating platform, our FFO per share growth projections of 2.5% and balance sheet strength compared with industry counterparts, this dividend growth rate is expected to be sustainable over the long run.
Key Risks for EQR
The elevated supply of apartments in some of EQR’s markets is a major concern. With the ongoing construction standing at a high level, a sizeable number of apartment deliveries are anticipated in the upcoming period. This is likely to weigh on the company’s ability to increase rent, restricting its growth momentum to a certain extent.
The Zacks Consensus Estimate for Centerspace’s current-year FFO per share has been raised marginally over the past two months to $4.83.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has moved marginally northward over the past month to $2.67.
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 Stock Rises 20.8% YTD: Will the Trend Continue?
Shares of Equity Residential (EQR - Free Report) have risen 20.8% year to date, outperforming the industry's growth of 12.3%.
In September 2024, EQR reported that it witnessed healthy demand and pricing for its apartment units during its primary leasing season. The company reiterated its earlier guidance of blended rate growth between 2% and 3% for the third quarter of 2024 and a physical occupancy level of 96.2% for the full-year 2024. It added that its same-store revenue growth will be able to meet its previous guided range as per its second-quarter earnings release.
Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 normalized funds from operations (FFO) per share being raised marginally upward over the past two months to $3.89.
Image Source: Zacks Investment Research
Factors Behind EQR Stock Price Surge: Will the Trend Last?
Core Business Strength: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 targeting places where affluent renters prefer to live, work and play and are not rent-burdened, creating the ability to raise rents more readily in good economic times and reducing risk during downturns.
In August 2024, EQR entered into an arrangement with Blackstone Group to acquire four properties in Atlanta, GA, four properties in Dallas/Ft. Worth, TX, and three properties in Denver, CO. This purchase marks a significant milestone in contributing to the company’s diversification efforts and growth plans targeting higher-end renters.
EQR 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.
EQR 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 relieve pressure on its balance sheet and drive growth over the long term.
EQR has an encouraging development pipeline. As of June 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 NOI upon completion and stabilization and are expected to fuel FFO and net asset value (NAV) growth.
Balance Sheet Strength:EQR has a healthy balance sheet with ample liquidity and financial flexibility. As of June 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. The company ended the second quarter of 2024 with a net debt to normalized EBITDAre of 3.92X. Unencumbered NOI as a percentage of the total NOI was 89.6% in the quarter, providing it financial flexibility and access to the debt market at favorable terms.
Dividend Payouts: Solid dividend payouts remain the biggest attraction for REIT investors, and EQR 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%. Given the company’s solid operating platform, our FFO per share growth projections of 2.5% and balance sheet strength compared with industry counterparts, this dividend growth rate is expected to be sustainable over the long run.
Key Risks for EQR
The elevated supply of apartments in some of EQR’s markets is a major concern. With the ongoing construction standing at a high level, a sizeable number of apartment deliveries are anticipated in the upcoming period. This is likely to weigh on the company’s ability to increase rent, restricting its growth momentum to a certain extent.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Centerspace (CSR - Free Report) and Cousins Properties (CUZ - 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 two months to $4.83.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has moved marginally northward over the past month to $2.67.
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