Post Properties - Momentum
Post Properties ( PPS )
The housing numbers yesterday may have looked fairly strong, but the bulk of the growth seemed to come from multi-family/rental unit type housing. This is no mistake; rent rates in the US are near all-time highs and they have been on the rise for a couple years now after the crash in 2009, as doubtful buyers move into a flexible, easy rent regimen.
If you live in a major metro area in the US, you might notice many more condos available to purchase than for rent. Those rentals are usually carrying big premiums because of less rental inventory and still unsure homebuyers. Post Properties manages many mid- to high-end communities in different markets across the US, and is reaping the benefits of the rental boom.
Post Properties is a REIT (real estate investment trust) that focuses on providing resort-style garden apartments and high-density urban apartments with an emphasis on resident service and a strong brand identification. The operate assets across the US in DC, Florida, Georgia, North Carolina, New York and Texas in select cities.
Anecdotally, I can tell you that they not only have a prominent brand presence in Dallas, but have shaped the city's neighborhoods in a big way (for the better). They have a reputation for quality in the city.
Post focuses most of their business on the Southern US.
They also sell homes under the Post Preferred Homes division. The ability to develop new properties for sale or to convert existing assets into upscale for-sale housing will give them an edge as the housing market improves and more buyers emerge. Given the recent rental boom, the company has been winding down this division.
For the time being, rentals (price and occupancy) remain strong. This trend recently prompted Cantor Fitzgerald to start their coverage of Post as a Buy with a target of $50. Keep in mind that cheap housing and expensive rent rates could create a shift in the housing market, driving people away from apartment living. For Post, their amenities and quality should help retain renters, at least for the next few quarters and until housing truly begins its recovery.
Financial Profile & Earnings
Post Properties is trading at about 20 times forward earnings. As a REIT they are required to throw off 90% of their profits in the form of dividends. Currently the company is yielding about 2%. They have managed to positively surprise analysts for the last four quarters at an average of almost 20%.
Throughout 2011 the company raised guidance by over 30%, which was more than any apartment REIT. As of their most recent quarter, they generated 78.61 million in revenue and reported earnings of 52 cents a share. They are expected to make 52 cents this quarter and $2.20 for FY2012.
We are seeing strong upside magnitude in PPS, with the consensus estimates for current and next quarter as well as FY2012 and FY2013 all moving higher over the past 3 months.
Analysts expect Post to grow earnings by 12-13% by the end of the current fiscal year.
Slow and Steady Wins the Race
Post Properties has been growing steadily for the past two years. The most recent pullback might offer investors an advantageous entry for a long position. While capital appreciation has been fairly stable in the stock, investors also have a nice dividend while they ride the oscillations in the market.
PPS is just above its 50-day moving average of $43.29 which can be viewed as near-term support. Below that is the 200-day moving average of $40.84. PPS has managed to stay above both of those levels for the past 18 months, falling below them during sharp market pullbacks.
Post outpaced the S&P 500 by 17.53% over the past year. It tends to have a little more volatility than your average REIT.
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O'Reilly Automotive (
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Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.
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