On Jul 4, 2013, we reiterated our long-term recommendation on
), a Chicago-based multi-family real estate investment trust
(REIT), at Neutral. The decision is based on the company's solid
operating platform, the Archstone acquisition and repositioning
moves. Yet, competitive pressures and the continuous acquisition
spree involve significant upfront expenses that drag down
Equity Residential's core FFO per share in the first quarter of
2013 reached 64 cents, a penny short of the Zacks Consensus
Estimate. This was, however, up 3 cents from the year-ago FFO per
Quarterly results were primarily driven by higher same-store net
operating income (NOI) and the benefits from stabilized Archstone
properties. However, the positives were partially offset by the
negative impact from other transaction activities and common
share issuance for the Archstone deal.
Going forward, we believe Equity Residential's focus on expansion
in the high barrier-to-entry regions of the U.S will drive its
top-line growth. The Archstone deal reinforces that. Moreover,
the echo boomers population continues to raise the demand for
apartments and with a decent balance sheet position, the company
is well poised to capitalize on this favorable trend through
acquisitions and developments.
However, the company's continuous acquisition spree involves
significant upfront expenses that drag down near-term
profitability till the properties get established. In addition,
the company faces significant competitive pressure. Hence, we are
not overtly optimistic on the stock and believe that the
risk/reward profile is currently balanced.
For Equity Residential, the Zacks Consensus Estimates for 2013
FFO per share remained stable at $2.87, while for 2014, it went
down a cent to $3.10, over the last 30 days. Therefore, the stock
carries a Zacks Rank #3 (Hold).
Other REITs to Consider
Some better-performing REITs that are worth considering include
Select Income REIT
), which has a Zacks Rank # 1(Strong Buy) and
Avalonbay Communities Inc.
Camden Property Trust
), that carry a Zacks Rank # 2 (Buy).
Funds from operations, a widely used metric to gauge the
performance of REITs, are obtained after adding depreciation and
amortization and other non-cash expenses to net income.
AVALONBAY CMMTY (AVB): Free Stock Analysis
CAMDEN PPTY TR (CPT): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
SELECT INCOME (SIR): Free Stock Analysis
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