Equity Residential Fares Well In Peak Leasing Season, Earns Upgrade From Analyst

BMO Capital Markets analyst John P. Kim upgraded Equity Residential EQR to Market Perform from Underperform, with a $64 target price.
The new rating reflects resilient U.S. employment data amid peak leasing season.
The unemployment rate advanced from 3.4% to 3.7%, contrary to forecasts of an increase to 3.5%.
BMO's Economics Team upgraded its near-term growth outlook for the U.S. economy, with the GDP forecast to +1.0% in Q2 2023 and the 2023 unemployment rate to 4.4% (from 4.8%).
Kim now expects the leasing season in Q2 and Q3 to remain unchanged, driving strong leasing for EQR.
Last week, EQR raised its 2023 guidance, with Normalized FFO per share increased to $3.73-$3.83 from $3.70-$3.80, same-store revenue growth to 5.5%-6.25% from 4.5%-6.0% and same-store NOI growth to 6.0%-7.0% from 4.75%-6.25% previously.
However, the company now expects moderated occupancy of 96.0% (-20 bps vs. earlier).
The analyst sees EQR's daily asking rents accelerating sequentially in Q2 2023 to date at a sector-high of +2.4% q/q vs the sector of +1.5% (as per CoStar data).
Meanwhile, on a Y/Y basis, Kim cites rents facing tougher comparables and expects them to moderate throughout the peak leasing season.
The analyst raised estimates for revenues to $711.4 million (from $708.8 million) in Q2 2023, $2.87 billion (from $2.86 billion) in 2023 and $2.96 billion (from $2.95 billion) in 2024.
Kim also raised expectations for FFO per share to $0.93 (from $0.92) in Q2 2023, $3.79 (from $3.74) in 2023 and $3.91 (from $3.88) in 2024.
Price Action: EQR shares are trading higher by 1.15% at $63.81 on the least check Monday.

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