Technology

Why Is Apartment Investment Management (AIV) Up 2.9% Since Last Earnings Report?

A month has gone by since the last earnings report for Apartment Investment Management (AIV). Shares have added about 2.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Apartment Investment Management due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Aimco's Q2 FFO & Revenues Miss Estimates, NOI Climbs

Aimco reported second-quarter 2019 pro forma FFO of 60 cents per share, missing the Zacks Consensus Estimate by a whisker. Also, the figure came in lower than the year-ago quarter’s reported tally of 61 cents.

Notably, total revenues of $224.2 million in the reported quarter lagged the Zacks Consensus Estimate of $229.06 million. Further, the revenue figure was roughly 10.4% lower than the prior-year quarter’s reported tally.

The company recorded decent growth in same-store property net operating income (NOI). However, the top line’s performance in the second quarter was negatively impacted by revenues lost from the company’s Asset Management business sale.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 3.8% year over year to $176.4 million, while expenses (net of utility reimbursements) were up 1.8% from the prior-year quarter to $47.2 million. Consequently, same-store NOI climbed 4.6% to $129.2 million on a year-over-year basis.

Same-store average daily occupancy expanded 60 basis points (bps) year over year to 96.9%. Rental rates on new leases were up 2%, whereas rental rates on renewal leases were up 5% from the expiring lease rates.

As of Jun 30, 2019, Aimco had cash and restricted cash of $65 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $3.2 billion.

Furthermore, at the end of the second quarter, Aimco had borrowing capacity of $498 million under its revolving credit facility, after consideration of $7 million of letters of credit backed by the facility.

Portfolio Activity

During the reported quarter, Aimco invested $52 million in redevelopment and development activities. In addition, the company is revamping its portfolio through property sales, and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-anticipated growth.
Through these moves, the company increased its average revenues per apartment home by 6% to $2,218. Additionally, NOI margin remained unchanged at 72% year over year. The company’s percentage of A, B and C+ home was 52%, 31% and 17%, respectively, in second-quarter 2019.

Guidance

For full-year 2019, the company revised pro forma FFO per share guidance to $2.44-$2.52 from $2.41-$2.51. The company’s full-year projections are backed by assumptions of same-store revenue growth of 3.6-3.8% and same-store expense growth of 2-2.6%, resulting in same-store NOI improvement of 4-4.4%.

For third-quarter 2019, Aimco issued pro forma FFO per share guidance of 60-64 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Apartment Investment Management has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Apartment Investment Management has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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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.