Shares of Equity Residential EQR witnessed a 1.3% gain in the after-hours trading session on Apr 23 after it reported first-quarter 2024 normalized funds from operations (FFO) per share of 93 cents, which surpassed the Zacks Consensus Estimate of 91 cents. The rental income of $730.8 million also beat the consensus mark of $729.8 million.

Results reflect decent same-store performances, backed by healthy demand, modest supply and a focus on expense efficiency. The company also experienced the lowest quarterly same-store turnover in its history.

On a year-over-year basis, the normalized FFO per share grew 6.9% from 87 cents, with rental income climbing 3.6%.

According to Mark J. Parrell, Equity Residential’s president and CEO, “The positive demand dynamics in our affluent renter demographic, limited new apartment supply in our existing predominantly coastal markets and our laser focus on expense management continue to produce good results.”

Quarter in Detail

Same-store revenues were up 4.1% year over year, driven by healthy demand and modest supply across most of the company’s markets. Same-store expenses rose 1.3%, with low or negative growth in its primary expense categories. Consequently, the same-store net operating income (NOI) climbed 5.5% year over year.

The average rental rate increased 3.4% year over year to $3,077 in the quarter ended March. Meanwhile, the physical occupancy increased 40 basis points year over year for the same-store portfolio to 96.3%. Our estimate for the metric was 95.7%. EQR had the lowest quarterly same-store turnover in its history of 8.6%.

Same-store residential revenues were up 3.9% year over year. The new lease change for its residential same-store properties was down 2.2%, while the renewal rate achieved by EQR was 4.7% for the first quarter. The blended rate for the quarter was 1.6%. The physical occupancy for this portfolio was 96.3%, up 50 basis points sequentially.

In the first quarter, Equity Residential did not acquire any operating properties. However, it sold three properties — one in Boston, one in Orange County and one in suburban San Francisco — comprising 504 apartment units and an average age of approximately 40 years for a total of $248.5 million at a weighted average Disposition Yield of 5.5%, generating an unlevered IRR of 13.1%.

Balance Sheet

Equity Residential exited the first quarter of 2024 with cash and cash equivalents of $44.5 million, down from the $50.7 million recorded at the end of 2023.

The net debt to normalized EBITDAre was 3.97X, which decreased from 4.12X in the previous quarter. The unencumbered NOI as a percentage of the total NOI was 89.6% in the quarter, slightly below the 89.8% experienced in the prior quarter.



Guidance

For the full-year 2024, Equity Residential did not revise its outlook for operating and normalized FFO per share from what was provided during the fourth-quarter 2023 earnings release. The company projected normalized FFO per share in the band of $3.80-$3.90. The Zacks Consensus Estimate is currently pegged at $3.86.

The company’s full-year guidance incorporated projections for same-store revenue growth of 2-3%, an expense increase of 3.5-4.5% and an NOI expansion of 1-2.6%. Also, physical occupancy is expected at 95.9%.

For the second quarter of 2024, the company projects normalized FFO per share in the band of 92-96 cents. The Zacks Consensus Estimate for the same is currently pegged at 96 cents.

Equity Residential currently carries a Zacks Rank #3 (Hold).

Equity Residential Price, Consensus and EPS Surprise Equity Residential Price, Consensus and EPS Surprise

Equity Residential price-consensus-eps-surprise-chart | Equity Residential Quote

Upcoming Earnings Releases of Residential REITs

We now look forward to the earnings releases of residential REITs like AvalonBay Communities, Inc. AVB, Essex Property Trust, Inc. ESS and UDR Inc. UDR. While AvalonBay is scheduled to report on Apr 25, both UDR and Essex Property Trust are slated for Apr 30.

The Zacks Consensus Estimate for AvalonBay’s first-quarter 2024 FFO per share is pegged at $2.64, which implies a 2.72% year-over-year increase. AVB currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Essex Property Trust’s first-quarter 2024 FFO per share is pegged at $3.74, which suggests 2.47% growth year over year. ESS currently carries a Zacks Rank #3.

The Zacks Consensus Estimate for UDR’s first-quarter 2024 FFO per share stands at 61 cents, which indicates a 1.67% rise year over year. UDR currently has 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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