Equity Residential (EQR) is experiencing lower levels of activity and growth in the Washington, DC market, where it has significant exposure (constituting 18.6% of stabilized NOI). The signs of stress due to the dampening of the metro area economy resulting from a rise in new supply and the impact of sequestration and furloughs, continue to pose a challenge for rent growth in the near term.
Nevertheless, encouragingly, Equity Residential is gaining ample revenues from markets like San Francisco, Seattle and Denver and expects to earn more from these further in 2014. Also, the company’s concerted efforts toward repositioning its portfolio from low barrier-to-entry/non-core markets to high barrier-to-entry/core markets is paving the way for top-line growth going forward. Moreover, the rise in apartments demand by the echo boomers population bodes well.
In July, Equity Residential reported second-quarter 2014 normalized FFO per share of 78 cents, surpassing the Zacks Consensus Estimate by a penny and the prior-year quarter figure by 7 cents, aided by a rise in same store net operating income (NOI), reduced total interest expense and increase in NOI from non-same store properties currently in lease up. Apart from this, last year’s Archstone acquisition added to the bliss.
To gain deeper insight into this residential real estate investment trust (REIT), you can refer to our updated research report, which was issued on Sep 10, 2014.
Over the last 60 days, the Zacks Consensus Estimate for FFO per share upped by a penny to $3.10 for 2014. Also, for 2015 it moved north by 4 cents to $3.32. The stock currently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Investors interested in the residential REIT industry may consider stocks like American Campus Communities, Inc. (ACC), Equity LifeStyle Properties, Inc. (ELS) and Essex Property Trust Inc. (ESS). All these stocks have a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.
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