) are on the rise thanks to strengthening fundamentals for the
rental housing market and superior execution of pricing &
expense control measures. With a dividend yield of 2.2%, this
apartment REIT (real estate investment trust) promises to be a
solid pick for investors seeking both growth and income.
Solid second quarter 2012 results, including a 10.3% year-over-year
jump in funds from operations (FFO), further support this Zacks #2
Rank (Buy). Earnings are presently expected to grow 12.9% and 9.9%
for 2012 and 2013, respectively.
Strong Second Quarter
Equity Residential reported strong second quarter results on July
25, with a 13.2% year-over-year growth in total revenues to
approximately $543.8 million. Same-store quarterly revenues
increased 5.5% to $489.9 million. Same-store net operating income
(NOI) advanced 7.5% year over year to $319.7 million, primarily due
to a 5.7% increase in average rental rates to $1,626 per apartment
Reported FFO came in at 64 cents per share, which were up from the
year-ago FFO of 58 cents. Recurring FFO of 68 cents per share
surpassed the year-ago tally of 68 cents and was in line with the
Zacks Consensus Estimate.
For the third quarter of 2012, recurring FFO is expected between 70
cents and 74 cents per share. For full year 2012, Equity
Residential expects recurring FFO of $2.73 to $2.78.
Surge in Earnings Momentum
Analysts have revised their earnings estimates higher for both 2012
and 2013, driving the stock to a Zacks #2 Rank (Buy). Over the past
30 days, the Zacks Consensus Estimate for 2012 increased 0.7% to
$2.74, implying a year-over-year growth of 12.9%. For 2013, the
Zacks Consensus Estimate has increased 0.3% to $3.01 over the same
time period, representing year-over-year growth of 9.9%.
Equity Residential paid a dividend of 33.75 cents per share in the
second quarter of 2012. Over the years, the company has paid a
regular quarterly dividend, and even paid two special dividends in
December 2010 and December 2011. The current dividend payment
affirms a yield of 2.2%.
Equity Residential's valuation metrics are at a premium on a
price-to-earnings (P/E) and price-to-sales (P/S) basis. Shares of
Equity Residential are currently trading at a forward P/E of
21.97x, versus the peer group average of 18.61x. On a P/S basis,
shares are trading at 8.61x versus 8.11x for the peer group
average. A healthy earnings growth prospect warrants the premium
valuation of the company.
Since March 5, 2012, Equity Residential shares have fared
relatively better than the simple moving average for 200 days or
SMA (200). In addition, the stock has outperformed the S&P 500
index since April 13, 2011. On a 5-year basis, the return for the
stock is phenomenal at 55.20% compared to an S&P 500 tally of
With a favorable supply/demand relationship, rising earnings
estimates, robust growth projections and a healthy dividend yield,
Equity Residential offers an enticing upside potential going
forward. In addition, a continued focus on some of the premium
markets of the country augurs well for its long-term growth.
Based in Chicago, Illinois, Equity Residential is the largest fully
integrated publicly traded multi-family REIT in the U.S. The
company has a portfolio of high-quality assets in some of the most
desirable markets across the country, which includes New York,
Boston, Washington D.C., Seattle, San Francisco and Los Angeles. As
of June 30, 2012, Equity Residential owned 421 properties in 14
states in the U.S. and the District of Columbia, consisting of
120,355 apartment units. The company presently has a market cap of
EQUITY RESIDENT (EQR): Free Stock Analysis
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