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Mid-America Apartment Communities (MAA) Down 2.4% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Mid-America Apartment Communities (MAA). Shares have lost about 2.4% in that time frame, outperforming the S&P 500.

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

Mid-America Apartment’s Q4 FFO & Revenues Top Estimates

MAA reported fourth-quarter 2019 FFO of $1.68 per share, surpassing the Zacks Consensus Estimate of $1.63. Further, the reported tally came in higher than the prior-year quarter’s $1.55.

This residential REIT’s quarterly results reflect growth in same-store NOI and rise in average effective rent per unit for the same-store portfolio.

Rental and other property revenues came in at $416.8 million in the quarter, marginally outpacing the Zacks Consensus Estimate of $416 million. The reported figure also came in higher than the year-ago quarter’s $398.1 million.

For full-year 2019, the FFO per share came in at $6.55, ahead of the Zacks Consensus Estimate of $6.50 and the prior-year tally of $6.04. This was supported by 4.4% year-over-year growth in rental and other property revenues to $1.6 billion.

Quarter in Detail

The same-store portfolio revenues grew 4.1%, backed by rise in average effective rent per unit of 4.3%, year over year. During the fourth quarter, the company’s same-store NOI increased 5% year over year. Moreover, average physical occupancy for the same-store portfolio was 95.7%, contracting 40 basis points (bps) year over year.

During fourth-quarter 2019, rent growth in the company’s same-store portfolio for both new and renewing leases, compared with the prior lease, increased 2.6% on a combined basis. This indicates a 100-basis-point improvement year over year.

As of Dec 31, 2019, unencumbered NOI was 90.2% of total NOI, lower than the 92.6% reported as of Dec 31, 2018.

As of Dec 31, 2019, MAA held cash and cash equivalents of nearly $20.4 million, down from approximately $34.3 million as of Dec 31, 2018. Additionally, as of the same date, total debt outstanding was $4.5 billion.

Furthermore, as of the same date, $947.7 million of combined cash and capacity were available under its unsecured revolving credit facility, net of commercial paper borrowings.

Portfolio Activity

During the December-end quarter, the company acquired The Greene, a new 271-unit multi-family apartment community in Greenville, SC.

In October, it exited the Little Rock, AK market with the sale of its five multi-family properties. Gross proceeds from the sale were $149.6 million.

During the quarter ended Dec 31, 2019, MAA completed the renovation of 1,733 units under its redevelopment program. With this, the company renovated 8,329 units during the year ended Dec 31, 2019.

At the end of the fourth quarter, MAA had seven development community projects under construction, with total projected costs of $489.5 million. Notably, an estimated $345.6 million remained to be funded as of Dec 31, 2019.

Outlook

For first-quarter 2020, MAA expects FFO per share of $1.53-$1.65.

MAA has guided 2020 Core FFO per share of $6.38-$6.62. The company’s full-year outlook is based on same-store portfolio revenue growth of 3.25-4.25%, same-store portfolio operating expense rise of 3.75-4.75% and same-store NOI increase of 3-4%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Mid-America Apartment Communities has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Mid-America Apartment Communities has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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