Aimco (AIV) Upgraded to Hold on Decent Earnings in 1Q15 - Analyst Blog

On May 12, 2015, Zacks Investment Research upgraded Apartment Investment and Management CompanyAIV , or Aimco, to a Zacks Rank #3 (Hold).

Why the Upgrade?

Aimco has a strong portfolio of B/B+ geographically diversified assets situated in the largest coastal and job growth markets in the U.S., along with high demand for apartment properties, which drive its growth momentum. Decent first-quarter 2015 earnings further helped the rating upgrade.

Notably, the company's first-quarter 2015 funds from operations ("FFO") came in at 51 cents per share, up a cent from the year-ago quarter figure, but in line with the Zacks Consensus Estimate. The year-over-year improvement was driven by higher property net operating income ("NOI") and transaction income, and partly offset by casualty losses associated with severe weather, loss of income from asset dispositions and prepayment penalties in the quarter. The company also raised its guidance range.

During the quarter, same-store revenues in the Conventional real estate portfolio increased 4.4% year over year to $172.1 million, while expenses inched up 2.9% year over year to $57.3 million. Consequently, same-store NOI jumped 5.2% year over year to $114.8 million.

On the other hand, Aimco competes with other housing alternatives such as rental apartments, condominiums and single-family homes that are available for rent or sale. Further, considering the present economic environment, we anticipate an interest rate hike in the medium term, which will likely pose a challenge for Aimco.

Over the past seven days, the Zacks Consensus Estimate for 2015 has remained unchanged at $2.18 but moved down a cent to $2.33 for 2016.

Stocks in the Sector

Investors interested in the residential REIT industry may consider better-ranked stocks like Armada Hoffler Properties, Inc. AHH , Avalonbay Communities Inc. AVB and Equity LifeStyle Properties, Inc. ELS . While Armada Hoffler Properties sports a Zacks Rank #1 (Strong Buy), both Avalonbay Communities and Equity LifeStyle Properties carry a Zacks Rank #2 (Buy).

Note: 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.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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