Home Properties, Inc.
) have been on a long-term uptrend since mid-2010, barring
volatility in late 2011 on fears of a double-dip recession. This
apartment REIT has put together six earnings surprises in the last
seven quarters and has an impressive dividend yield of 4.4%.
Strong fundamentals in the multifamily apartment market and solid
first quarter 2012 results add further strength to this Zacks #2
Rank (Buy) stock. Earnings are presently expected to grow 12.1% in
2012 and 6.4% in 2013.
Strong First Quarter
Home Properties reported strong first quarter results on May 3,
with a 13.4% year-over-year growth in total revenues to $160.3
million. Same-store net operating income increased 9.9%. This was
the highest such first quarter increase recorded in the past five
years, driven by a same-store revenue growth of 4.6% and a decrease
in operating expenses of 2.8%.
Funds from operations (FFO) came in at 98 cents per share,
surpassing the Zacks Consensus Estimate by 5.4% and the year-ago
FFO by 14.0%. Average physical occupancy for same-store properties
remained solid at 95.5% for the quarter, while average monthly
rental rates surged 4.8% year-over-year to $1,207.
Based on healthy first quarter results, management raised the FFO
guidance for 2012 to between $3.87 and $3.99 per share from the
earlier range of $3.79 to $3.95. For the second quarter of 2012,
FFO is expected in the range of 93 cents to 97 cents per share.
Analysts have revised their earnings estimates upward for both 2012
and 2013, driving the stock to a Zacks #2 Rank (Buy). The current
Zacks Consensus Estimate for 2012 is at the higher end of the
company guidance at $3.97, implying year-over-year growth of 12.1%.
For 2013, the Zacks Consensus Estimate of $4.22 represents growth
Home Properties paid a dividend of 66 cents per share in the first
quarter of 2012, which marked a 6.5% increase over the year-ago
quarter. The company has historically paid an uninterrupted
dividend since 1995, even during the recession. The current
dividend payment affirms a yield of 4.4%.
Home Properties' valuation metrics are at a premium on a
price-to-earnings (P/E) and price-to-sales (P/S) basis. Shares are
currently trading at a forward P/E of 15.06x versus the peer group
average of 12.82x. On a P/S basis, Home Properties is trading at
4.86x versus 2.31x for the peer group average.
Given the double-digit earnings growth prospects of the company in
the current year, the premium valuation should not disappoint
Earnings estimates for 2012 are moving higher for Home Properties,
as mirrored in the following 12 Month EPS chart.
The Bottom Line
With a favorable supply/demand relationship, rising earnings
estimates, robust growth projections and a healthy dividend yield,
Home Properties offers an enticing upside potential going forward.
Also supporting long-term growth is the company's continued focus
on stable markets in major metropolitan areas with significant
barriers to entry and its prudent cost-control initiatives.
Based in Rochester, New York, Home Properties owns and operates
apartment communities primarily along the East Coast of the U.S.
The company provides quality housing alternatives at affordable
prices to a broad range of middle-income residents. Presently, its
portfolio includes 124 apartment communities containing 42,068
apartment units. The company currently has a market cap of $2.9
HOME PPTYS INC (HME): Free Stock Analysis
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