On Jan 7, 2014, we reiterated our long-term recommendation on
) at Neutral. The decision is based on this apartment real estate
investment trust's (REIT) fundamentals and the current market
Equity Residential's normalized FFO per share in third-quarter
2013 reached 73 cents, in line with the Zacks Consensus Estimate
and the prior-year quarter figure. Higher same store net
operating income and the benefit from stabilized Archstone
properties were offset by the negative impact from disposition
activity, common share issuance for the Archstone deal and
elevated interest expense.
Equity Residential expects normalized FFO per share to range
between 75 cents - 77 cents in fourth-quarter 2013. For full-year
2013, the company raised the lower end of its normalized FFO
guidance range and now expects it in the range of $2.83-$2.85
(prior range being $2.80 - $2.85).
Going forward, we believe Equity Residential's focus on expansion
in the high barrier-to-entry regions in the U.S. will drive
top-line growth. The Archstone acquisition, which the company
AvalonBay Communities Inc.
) closed last February, further reinforces that.
Also, the echo boomers population continues to raise the demand
for apartments. Alongside, with a decent balance sheet position,
the company is well poised to capitalize on this favorable trend
through acquisitions and developments.
Yet, the company has a decent exposure to the Washington D.C.
market, which has started experiencing a rise in new supply, thus
posing a challenge for base rent growth in the near term. Hence,
we believe that the risk/reward profile for the company currently
remains balanced and therefore, reaffirmed our Neutral stance.
Over the last 60 days, the Zacks Consensus Estimate for 2013 and
2014 FFO remained stable at $2.84 and $3.10 per share,
respectively. Equity Residential now carries a Zacks Rank #3
Other Stock to Consider
Investors interested in the REIT-Equity Trust - Residential
industry may consider stocks like
BRE Properties Inc.
). Both these stocks carry 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.
AVALONBAY CMMTY (AVB): Free Stock Analysis
BRE PROPERTIES (BRE): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
UDR INC (UDR): Free Stock Analysis Report
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