Yahoo Finance Equity Residential (EQR) Sees '24 Revenues, NOI & FFO at High End
Equity Residential EQR expects its 2024 same-store revenues, net operating income (NOI) and normalized funds from operations (FFO) per share results toward the higher end of its existing guidance ranges.
This latest projection comes with the residential REIT experiencing sustained high demand across its market, which is pushing physical occupancy above expectations. Also, strong pricing power in its East Coast markets and continued recovery in its West Coast markets are tailwinds.
Equity Residential noted that in May (preliminary data as of May 24, 2024), physical occupancy reached 96.5%, up from 96.3% in the first quarter of 2024 and 95.8% in the fourth quarter of 2023. The blended rate for May is 2.9%, improving from 1.6% in the first quarter and 0.7% in the fourth quarter. Particularly, the new lease change was 0.4% in May against a decline of 2.2% in the first quarter of 2024 and a fall of 4.6% in the fourth quarter of 2023.
Moreover, with better-than-expected performance in utilities and repair and maintenance expenses, same-store expense results are trending toward the low end of its existing guidance range.
According to Equity Residential, the long-term fundamentals in its markets support a healthy multifamily operating environment. On the supply front, EQR pointed out that relative to the highly supplied Sunbelt, the new supply in Established Markets, which marks around 95% of its portfolio, is manageable.
Equity Residential also noted that with low unemployment and solid wage growth, the job market remains firm. EQR’s high-earning consumers remain financially resilient, ensuring steady and secured cash flows. Moreover, amid an undersupply of housing, single-family home costs are likely to remain elevated.
The REIT expects bad debt, net, to continue to improve, with roughly 30 bps forecasted contribution to growth. Also, it projects innovation initiatives to add to other income and lower expenses in 2024 (roughly $10 million).
For the full-year 2024, Equity Residential expects normalized FFO per share in the band of $3.80-$3.90. The Zacks Consensus Estimate is currently pegged at $3.88.
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%.
In Conclusion
Equity Residential boasts a portfolio of high-quality apartment units in some of the key markets of the United States that have an affluent tenant base. The high cost of home ownership is likely to keep renter demand up in its markets, aiding the company. A focus on technology and organizational capabilities to drive margin expansion and operational efficiency act as tailwinds.
However, the elevated supply of new rental units in some of its markets is likely to fuel competition and curb pricing power, thereby impeding the rent growth momentum to some extent. High interest rates add to its woes.
Currently, Equity Residential carries a Zacks Rank of 3 (Hold). Shares of EQR have risen 6.4%, outperforming its industry’s climb of 3.5% over the past three months.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Rexford Industrial Realty, Inc. REXR and OUTFRONT Media Inc. OUT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Rexford Industrial Realty’s 2024 FFO per share stands at $2.34, which indicates an increase of 6.85% from the year-ago period’s actual.
The Zacks Consensus Estimate for OUTFRONT Media’s 2024 FFO per share is pegged at $1.71, which suggests 4.27% year-over-year growth.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Equity Residential (EQR) : Free Stock Analysis Report
Rexford Industrial Realty, Inc. (REXR) : Free Stock Analysis Report
OUTFRONT Media Inc. (OUT) : Free Stock Analysis Report
