Equity Residential to Post Q3 Earnings: What's in the Offing?

Equity Residential EQR is slated to report third-quarter 2018 results on Oct 23, after market closes. The company is expected to experience growth in revenues and funds from operations (FFO) per share in the upcoming quarterly results.

In the last reported quarter, this Chicago, IL-based residential real estate investment trust (REIT) delivered a better-than-expected performance in terms of FFO per share. Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate thrice, with an average positive surprise of around 0.93%. The graph below depicts this surprise history:

Equity Residential Price and EPS Surprise
 

Equity Residential Price and EPS Surprise | Equity Residential Quote

Let’s see how things are shaping up for Equity Residential prior to this announcement.

Factors at Play

In the to-be-reported quarter, Equity Residential is expected to benefit from its efforts to reposition the company’s portfolio in high barrier-to-entry/core markets. Moreover, the company is poised for expansion amid economic recovery and job-market growth. Particularly, favorable demographics, lifestyle transformation and creation of new households amid improving economy are likely to drive demand for the company’s properties in the upcoming quarters.

Moreover, the third quarter of this year proved to be an encouraging one for the U.S. apartment market with accelerating rent growth and increasing occupancy level. In fact, rents grew at an annual pace of 2.9% in the quarter and reversed the pattern of slowing price hikes, since late 2015, per a study by the real estate technology and analytics firm — RealPage, Inc. RP. Also, occupancy came in at 95.8%, up from 95.4% reported in the previous quarter.

Amid this, Equity Residential is expected to witness high occupancy of its properties. Moreover, the company projects normalized FFO per share of 81-85 cents for third-quarter 2018. Results are likely to reflect positive impact from growth in same store net operating income (NOI) and lower corporate overhead, and negative effect from higher total interest expenses.

Also, the Zacks Consensus Estimate for FFO per share is currently pegged at 83 cents, which indicates a projected increase of 3.75% year over year. The growth is expected to be backed by revenues and in fact, the Zacks Consensus Estimate for the company’s revenues is pegged at $643.7 million, reflecting expected growth of around 3.14% year over year.

In addition, the company’s activities during the quarter raised analysts’ optimism. Consequently, the Zacks Consensus Estimate inched up a cent to 83 cents over the last 60 days.

Nevertheless, Equity Residential too has been experiencing substantial new supply across a number of markets. High supply is anticipated to continue to put pressure on new lease rates, occupancy and retention. Further, there is increased concession activity amid higher supply, which is another concern.

Earnings Whispers

Our proven model does not conclusively show that Equity Residential will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.

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

Earnings ESP: The Earnings ESP is -0.77%.

Zacks Rank: Equity Residential has a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.

Stocks That Warrant a Look

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

Duke Realty Corporation DRE, slated to release third-quarter results on Oct 24, has an Earnings ESP of +2.56% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ventas, Inc. VTR, scheduled to release earnings on Oct 26, has an Earnings ESP of +0.74% and a Zacks Rank #3.

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

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RealPage, Inc. (RP): Free Stock Analysis Report
 
Equity Residential (EQR): Free Stock Analysis Report
 
Duke Realty Corporation (DRE): Free Stock Analysis Report
 
Ventas, Inc. (VTR): Free Stock Analysis Report
 
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