What’s in store for Mid-America Apartment’s (MAA) fourth quarter earnings? – February 1, 2022

Mid-America Apartment Communities, Inc. (MAA Quick QuoteMAA – Free Report) – commonly referred to as MAA – is set to release its fourth quarter and full year 2021 results on February 2, after the market closes. MAA’s quarterly results are expected to reflect growth in revenue and funds from operations (FFO) per share.

The Germantown, Tennessee-based residential real estate investment trust (REIT) posted a surprise 4.09% in terms of FFO per share in the last quarter. Quarterly results were boosted by an increase in the average effective rent per unit for the comparable store portfolio.

Over the past four quarters, MAA has exceeded the Zacks consensus estimate on all occasions, averaging 2.40%. This is represented in the table below:

Let’s see how things went for the announcement.

Factors to consider

For the US apartment market, 2021 appeared to be a robust year, with tenant demand continuing to increase significantly. Net demand totaled more than 673,000 units, surpassing the previous peak set in 2000 by 66%, according to a report by real estate technology and analysis firm RealPage.

Household formation appears to have taken place at a faster pace and has fueled demand for apartments as well as other housing types. In addition, tenant income continued to increase. Limited availability has led to price appreciation and actual asking rents on new leases have increased by 14.4% in 2021.

Additionally, for the first time, the national apartment market saw higher occupancy in the fourth quarter, which is otherwise considered a seasonally slow rental period. This increase can be attributed to the pandemic which disrupted seasonal behavior. In the fourth quarter, US occupancy climbed 30 basis points (bps), reaching 97.4% by year-end, in contrast to an average decline of 40 bps during the said period over the past three decades.

With a well-diversified portfolio, MAA is poised to have benefited from this improving trend. Favorable job and household immigration trends in the Sun Belt submarkets likely boosted demand and increased rents for MAA communities during the fourth quarter. Additionally, MAA’s focus on strategic realignments bodes well.

According to November’s management investor conference presentation, average weighted lease price growth over the previous lease for MAA’s same-store portfolio increased to 16.3% in October from 15% in the third quarter. . However, in October 2021, the average physical occupancy rate of the same store portfolio was 95.9%, down from the 96.4% reported in the third quarter.

Zacks’ consensus estimate for quarterly revenue is pegged at $464 million, suggesting a 9.53% increase from the figure reported a year ago. Same-store revenue is expected to be $457 million, an increase of 14.8% over the reported figure for the prior year quarter.

Ahead of the fourth quarter earnings release, the Zacks consensus estimate for quarterly FFO per share was revised up 1.1% to $1.87 over the past two months. This requires year-over-year growth of 13.3%.

However, high supply may have put pressure on rental rates and affected the pace of revenue growth in the quarter under review.

For the year as a whole, the Zacks consensus estimate for FFO per share has been revised up slightly to $6.98 over the past two months. The figure shows a 9.5% increase over the figure reported the previous year, while the same figure for revenue stands at $1.78 billion.

Management expects the 2021 base FFO per share to be between $6.88 and $7.00, with the midpoint at $6.94.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a positive surprise in terms of FFO per share for MAA this season. The combination of a positive earnings ESP and a Zacks rank of #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chance of an FFO beat. However, that is not the case here.

You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.

ESP Earnings: MAA has an ESP on earnings of -0.38%.

Zack’s Ranking: MAA currently wears a #2 Zacks rank.

Actions worth a look

Here are some actions like Alpine income properties (PIN Quick QuotePINE – free report), East Group Properties (EGP Quick QuoteEGP – free report) and Highwoods Properties (HIW Quick QuoteHIW – Free Report), which are worth considering by the REIT industry, as our model shows they have the right mix of elements to deliver a surprise this reporting cycle:

AlpineIncome Properties, which is expected to report fourth quarter results on Feb. 10, has an ESP of +10.34% and a No. 3 Zacks ranking at present.

EastGroup Properties, which is due to release quarterly figures on Feb. 8, has an earnings ESP of +0.32% and a Zacks rating of 2, currently.

Highwoods Properties, which is expected to report fourth quarter results on February 8, has an ESP of +2.67% and a Zacks rank of 3 at present.

Stay on top of upcoming earnings announcements with Zacks Earnings Calendar.

To note: Everything related to earnings presented in this article represents funds from operations (FFO) – a metric widely used to assess the performance of REITs.