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Is a Beat in the Cards for Aimco (AIV) This Earnings Season?

Apartment Investment & Management Co. AIV — commonly known as Aimco — is slated to report third-quarter 2020 results on Oct 29, after market close. The company’s results will likely reflect a year-over-year decline in revenues and funds from operations (FFO) per share.

In the last reported quarter, the Denver, CO-based residential real estate investment trust (REIT) reported pro-forma FFO of 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. Results benefited from higher residential rent and substantial rent collections. However, declining occupancy was a headwind.

Over the trailing four quarters, Aimco surpassed the Zacks Consensus Estimate on three occasions and missed in the other. The company reported a surprise of 1.60%, on average. This is depicted in the chart below:

Apartment Investment and Management Company Price and EPS Surprise

 

Apartment Investment and Management Company Price and EPS Surprise

Apartment Investment and Management Company price-eps-surprise | Apartment Investment and Management Company Quote

Let’s see how things have shaped up for this announcement.

The U.S. apartment leasing activity rebounded during the third quarter at a meaningful pace, mainly driven by an increase in leasing activity in the Sun Belt region. It also indicates the occurrence of job growth after the slump earlier this year, which facilitated new household formation reappearance in a number of markets.

Per the latest report from real estate technology and analytics firm RealPage, the occupied apartment count climbed 146,517 units, on net, across the 150 largest U.S. markets during the September-end quarter. This marks the largest third-quarter demand figure since before the Great Recession. Moreover, product absorption pace in the quarter under review was more than four times the minimal demand for about 34,000 apartments recorded in the second quarter, according to the report.

However, this bouncing back has not been uniform. Though the Sun Belt markets staged a recovery, a number of gateway markets suffered net move-outs during the to-be-reported quarter, and urban core neighborhoods still struggled.

As for Aimco, the company’s portfolio of apartment communities is diversified across “A,” “B,” and “C+” price points as well as geographies. This is likely to have provided support to the apartment REIT in generating decent operating cash flows during the quarter under review. Moreover, despite the economic turbulence, resilience in its operating platform is expected to have driven residential rent collections for the quarter.

Over the past few quarters, the company has been focusing on improving its portfolio quality through measures like capital enhancements, redevelopments and occasional developments. These efforts are likely to have improved its average revenues per apartment home for the third quarter and boosted same-store property net operating income (NOI).

Despite a resurgence in the U.S. apartment leasing activity during the July-September period, the pandemic and the resultant macroeconomic uncertainties have likely made new leasing very competitive. This is likely to have hindered the company’s pricing power and top-line growth in the to-be-reported quarter.

Notably, the Zacks Consensus Estimate for third-quarter revenues is pegged at $213.6 million, indicating a decline of 7.1% from the year-ago quarter’s reported figure.

Prior to the third-quarter earnings release, there is a lack of any solid catalyst for becoming optimistic about the company’s prospects. In fact, the Zacks Consensus Estimate for the third-quarter FFO per share has been unchanged at 59 cents over the past month. Nonetheless, it suggests a 7.8% year-over-year decline.

Earnings Whispers

Aimco has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of a FFO beat this quarter.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Aimco has an Earnings ESP of +1.20%

Zacks Rank: The company currently carries a Zacks Rank of 3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks That Warrant a Look

Here are a few other stocks in the REIT sector that you may want to consider, as our model shows that these too have the right combination of elements to report a beat this quarter:

Lexington Realty Trust LXP, set to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.33% and a Zacks Rank of 3.

National Storage Affiliates Trust NSA, slated to release third-quarter earnings on Nov 5, has an Earnings ESP of +4.88% and a Zacks Rank of 2 (Buy) at present.

Ventas, Inc. VTR, slated to release third-quarter earnings on Nov 6, has an Earnings ESP of +2.03% and a Zacks Rank of 3 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Apartment Investment and Management Company (AIV): Free Stock Analysis Report
 
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