What To Expect From Mid-America Apartment Q4 Earnings?

Mid-America Apartment Communities, Inc. MAA is slated to report fourth-quarter 2017 results on Jan 31, after the market closes.

Last quarter, this Memphis, TN-based residential real estate investment trust (REIT) delivered a positive surprise with respect to funds from operations (FFO) per share of 2.04%. Quarterly results reflected growth in same-store property net operating income (NOI) and rise in average effective rent per unit for the same-store portfolio.

The company beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 1.54%. The graph below depicts this surprise history:

Mid-America Apartment Communities, Inc. Price and EPS Surprise
 

Mid-America Apartment Communities, Inc. Price and EPS Surprise | Mid-America Apartment Communities, Inc. Quote

Let's see how things are shaping up for this announcement.

Factors to Consider

Per a study by the real estate technology and analytics firm — RealPage, Inc. RP — the U.S. apartment market reported moderate rent growth for the calendar year 2017 and seasonal pricing cuts in the fourth quarter. While U.S. apartment rents increased at a modest rate of 2.5% in 2017, effective rents for new leases edged down 0.9% during the quarter. Admittedly, the levels of rent growth have moderated from the earlier years. However, national apartment occupancy came in at 95.1% at the end of fourth-quarter 2017, remaining stable year over year.

MAA maintains a well-balanced portfolio with a solid presence in around 39 Metropolitan Statistical Areas (MSAs), located in the Southeast and Southwest regions of the United States. Further, favorable demographics and strong job growth in target markets are anticipated to drive demand for MAA's properties. The Zacks Consensus Estimate for fourth-quarter total revenues is currently pegged at $386.3 million, denoting projected growth of 25.8% year over year.

However, it should be noted that the fourth quarter is seasonally sluggish. Moreover, supply of new units increased in a number of markets, including Dallas and Austin. Hence, any robust growth in its same-store portfolio is likely to remain restricted in the soon-to-be-reported quarter. In addition, there is high concession activity amid higher supply, which remains another concern.

For the quarter under review, MAA projects FFO per share in the range of $1.40-$1.50 per share.

Nonetheless, prior to the quarterly earnings release, there is lack of any solid catalyst for raising optimism about the company's business activities and prospects. As such, the Zacks Consensus Estimate for FFO per share for the quarter to be reported remained unchanged at $1.48, in a month's time. Also, this indicates a 1.3% decrease year over year.

Earnings Whispers

Our proven model does not conclusively show that MAA is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: MAA has an Earnings ESP of -2.31%, representing the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: MAA's Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident about an earnings surprise.

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.