Post Properties - Growth & Income
Post Properties Inc. ( PPS ) has watched most earnings estimates advance for 2012 and 2013, following a solid third quarter report that included a raised FFO outlook for the year. Also, this Zacks #2 Rank (Buy) REIT currently pays a regular quarterly dividend that yields 2.0% annually.
With a steady dividend yield, an expected long-term earnings growth rate of 13.9% and a 16.4% gain in the past year, PPS looks like a promising pick for investors seeking both growth and income.
Impressive Third Quarter Earnings
On October 29, Post Properties reported third quarter FFO per share of 76 cents, topping the Zacks Consensus Estimate by 22.6% and last year's FFO by 46.2%. The healthy top-line growth was due to a sturdy operating platform that helped deliver robust same-store operating performances.
On a year-over-year basis, total revenues for same store communities advanced 6.7%, while same store net operating income (NOI) increased 9.0%. The average monthly rental rate per unit climbed 6.4% year over year. Furthermore, the average economic occupancy for same store communities spiked 20 basis points to 96.6% from 96.4% in the year-ago quarter.
Based on robust third quarter results, management raised the FFO guidance for 2012 to between $2.77 and $2.81 per share, compared to the earlier range of $2.50 to $2.60. The increased guidance is based on same-store revenue growth of 6.9% to 7.1% and a same-store NOI growth between 8.2% and 8.6%.
Earnings Estimates Moving Higher
The Zacks Consensus Estimate for 2012 is up 2.6% to $2.78 in the past 60 days, as 11 of 13 total estimates moved higher. The Zacks Consensus Estimate for 2013 advanced 5.9% to $2.86, based on upward revisions from11 of 14 estimates.
The Zacks Consensus Estimate for 2012 reflects year-over-year growth of about 41.8%, while the expected growth rate for 2013 is 2.7%.
Post Properties hiked its dividend by nearly 14% to 25 cents per share in the first half of 2012. The current dividend rate affirms an annual yield of 2.0%.
Shares of Post Properties currently trade at 17.8x 12-month forward earnings, a 5.3% premium to the peer group average of 16.9x. Its price to book ratio of 2.4 is at a 20.0% premium to the peer group median of 2.0. Given its strong fundamentals, the premium valuation is justified.
Moreover, the company has a trailing 12-month ROE of 6.6%, compared with the peer group average of 5.9%. This implies that the company reinvests its earnings more efficiently than its peer group.
Post Properties has been continuously outperforming the S&P 500 since mid-October, and has also been outperforming its 200 and 50 days moving averages since the beginning of last month. The return for the stock in 2012 came in at 16.4% compared with the S&P 500's return of 11.7%.
Post Properties is a real estate investment trust that was founded in 1971. The company is a developer and operator of upscale multifamily communities. It has operations in ten markets across the country and has interests in 22,218 apartment units in 60 communities. The company has a market cap of about $2.7 billion. Other Zacks #1 Rank (Strong Buy) stocks in the same industry include AG Mortgage Investment Trust, Inc. ( MITT ).
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