Yahoo Finance Equity Residential (EQR) Misses Q1 FFO Mark, Guides Q2 in Line
Equity Residential’s EQR first-quarter 2023 normalized funds from operations (FFO) per share of 87 cents increased 13% year over year but narrowly missed the Zacks Consensus Estimate of 88 cents.
The rental income of $705.1 million increased 7.9% year over year and also exceeded the consensus mark of $699.5 million. It also surpassed our estimate of $697.1 million.
Results reflected continued healthy demand and lower-than-anticipated bad debt. EQR also noted that it experienced better payment and move-out activity related to delinquent residents than assumed in its February 2023 guidance.
However, higher expenses due to repair and maintenance work resulting from severe California rain storms, coupled with increased property-related legal and administrative expenditures, acted as a dampener. Also, there was a contraction in physical occupancy.
Quarter in Detail
Same-store revenues were up 9.2% year over year, driven by healthy demand and lower-than-anticipated bad debt. However, due to repair and maintenance expenses resulting from severe California rain storms and increased property-related legal and administrative expenses, same-store expenses flared up 7.2%. Consequently, same-store net operating income (NOI) surged 10.2% year over year.
The average rental rate increased 9.8% year over year to $2,968 in the quarter ended March. Meanwhile, the physical occupancy contracted 50 basis points (bps) to 95.9% for the same-store portfolio. Our estimate for the same was 95.7%.
Same-store residential revenues were up 9.2% year over year, while expenses increased 7.2%. Consequently, same-store residential NOI expanded 10.2% year over year.
The new lease change for its residential same-store properties was up 1.3%, while the renewal rate achieved by EQR was 6.2% for the first quarter. The blended rate for the quarter was 3.9%. The physical occupancy for this portfolio was 95.9%, up 10 bps sequentially.
In the first quarter, Equity Residential did not acquire any operating properties. However, EQR sold a small portfolio of seven properties in Los Angeles, CA, comprising 247 apartment units for $135.3 million.
Balance Sheet
Equity Residential exited the first quarter of 2023 with cash and cash equivalents of $133.46 million, up from the $53.9 million recorded at the end of 2022.
The net debt to normalized EBITDAre was 4.17X, which declined from 4.38X in the previous quarter. The unencumbered NOI as a percentage of the total NOI was 88.3% in the quarter compared with the 88.2% reported in the prior quarter.
Guidance
For the second quarter of 2023, EQR projects normalized FFO per share in the band of 91-95 cents. The Zacks Consensus Estimate for the same is currently pegged at 94 cents.
Equity Residential currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Equity Residential Price, Consensus and EPS Surprise
Equity Residential price-consensus-eps-surprise-chart | Equity Residential Quote
Upcoming Earnings Releases
We now look forward to the earnings releases of residential REITs like AvalonBay Communities, Inc. AVB, Mid-America Apartment Communities, Inc. MAA and Essex Property Trust, Inc. ESS.
While AvalonBay Communities and Mid-America Apartment Communities are slated to report results today after market close, Essex Property Trust is scheduled to come up with its results on Apr 27.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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AvalonBay Communities, Inc. (AVB) : Free Stock Analysis Report
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