On Mar 13, 2014, we issued an updated research report on the
residential real estate investment trust (REIT) -
Apartment Investment and Management Company
) - better known as
On Feb 6, Aimco reported pro forma funds from operations (FFO) of
57 cents per share for fourth-quarter 2013, a penny ahead of the
Zacks Consensus Estimate and a nickel above the year-ago quarter
Improved property operating results and lower offsite costs drove
the year-over-year rise in pro forma FFO. However, the results
were partly dwarfed by higher interest expense and lower income
from discontinued operations.
We believe that Aimco's strong portfolio of B/B+ geographically
diversified assets and the expected rise in demand for apartment
properties driven by 'echo boomers' position it well for growth
in the future. Moreover, the company's current focus on selling
its lowest-rated portfolio and reinvesting the proceeds to boost
its Conventional portfolio is a strategic fit for strengthening
its overall portfolio quality. The company also hiked its
dividend by over 8% in recent months.
Yet, we expect an adverse impact on earnings in the near term
from these asset dispositions. Apart from this, though Aimco is
focusing on improving its balance sheet, we notice that the
leverage level is still high. This lowers the company's financial
flexibility and impedes its growth momentum to some extent.
In addition, a rise in interest rates is anticipated in the long
run on the Fed's withdrawal of its stimulus program, which in
turn would raise the company's interest expense. Therefore, we
have a balanced view on this stock.
Notably, Aimco has reported an average earnings surprise of 2.00%
in the trailing four quarters of 2013. However, over the last 30
days, the Zacks Consensus Estimate for 2014 declined 3.7% to
$2.08 per share and for 2015 it dropped to 1.7% to $2.29 per
share. The stock currently has a Zacks Rank #4 (Sell).
Stocks that Warrant a Look
Some better-ranked stocks in the residential REIT industry
BRE Properties Inc.
Education Realty Trust, Inc.
). All three stocks have a Zacks Rank #2 (Buy).
FFO, a widely used metric to gauge the performance of REITs,
is obtained after adding depreciation and amortization and other
non-cash expenses to net income.
APARTMENT INVT (AIV): Free Stock Analysis
BRE PROPERTIES (BRE): Free Stock Analysis
EDUCATION RLTY (EDR): Free Stock Analysis
UDR INC (UDR): Free Stock Analysis Report
To read this article on Zacks.com click here.