What Awaits Mid-America Apartment (MAA) This Earnings Season? – January 31, 2023

Mid-America Apartment Communities, Inc. (MAA Quick QuoteMAA – Free Report) – commonly known as MAA – is expected to report fourth quarter and full year 2022 results on February 1 after market close. MAA’s quarterly results are likely to reflect growth in revenue and funds from operations (FFO) per share.

The Germantown, TN-based residential real estate investment trust (REIT) delivered a surprise 4.78% in terms of FFO per share in the last reported quarter. This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio.

MAA has a decent history of surprises. Over the last four quarters, MAA has outperformed the Zacks Consensus Estimate on all occasions, averaging 2.50%. This is depicted in the graph below:

Let’s see how things have shaped up for the announcement.

Factors to consider

For the US apartment market, low consumer confidence and high inflation have taken a toll, with net demand for apartments ending in negative territory for calendar 2022, according to a report from real estate technology and analytics firm RealPage. Despite solid job growth and wage gains, there was weak demand for all types of housing.

Amid this soft demand, rents for new rental apartments fell for the fourth consecutive month in December, falling another 0.4%. The cumulative rent drop was around 1.6% since September. The national apartment vacancy rate also rose from a record seasonal low of 2.5% one year ago to 5.0% in December 2022.

However, MAA’s diversified Sunbelt portfolio is well poised to benefit from the favorable fundamentals of this market. The pandemic has accelerated job shifts and a population influx into the company’s markets as tenants seek more business-friendly, lower-tax, low-density cities. These favorable long-term secular dynamic trends increase the desirability of its markets.

The high prices of single-family ownership units continue to drive demand for rental apartments. Amidst this, MAA is well poised to capture recovery in demand and letting compared to expensive coastal markets. In the fourth quarter, MAA is expected to have experienced strong rental growth and stable occupancy, thereby driving revenue growth.

MAA also continues to implement its three internal investment programs – interior redevelopment, property repositioning projects and Smart Home installations. The programs are expected to have helped the company capture the upside potential in rental growth, generate growing returns and boost earnings from its existing asset base.

The Zacks Consensus Estimate for quarterly revenue was pegged at $525.5 million, suggesting an increase of 13.36% from the year-ago reported figure. Same-store revenue is projected at $517.65 million, marking an increase from the $495.38 million reported in the previous quarter and $444.39 million in the year-ago period.

The consensus estimate for physical occupancy is currently pegged at 95.7% for the fourth quarter, down slightly from 95.8% in the previous quarter.

MAA projects fourth quarter 2022 core FFO per share in the range of $2.19-$2.35, with $2.27 at the midpoint.

Prior to the fourth quarter earnings release, the company’s activities were sufficient to gain analysts’ confidence. The Zacks Consensus Estimate for quarterly FFO per share was revised up a cent last month to $2.28. This indicates year-on-year growth of 20%.

This residential REIT estimates 2022 core FFO per share in the range of $8.37-$8.53, with a midpoint of $8.45. This is supported by a projection for same-store real estate revenue growth of 13.0-14.0%, same-store real estate operating expense growth between 7.0% and 7.5% and same-store NOI growth expected becomes between 16.0% and 18.0%.

For the full year, the Zacks Consensus Estimate for core FFO per share is pegged at $8.46. The figure represents a 20.7% year-over-year increase on 13.5% year-over-year revenue growth to $2.02 billion.

Here is what our quantitative model predicts:

Our proven model is definitely not predicting a surprise in terms of FFO per share for MAA this season. The combination of a positive earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.

MAA currently has a Zacks Rank of 3 and has an Earnings EVP of -0.06%. You can discover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Stocks that warrant a look

Here are three stocks from the broader REIT sector – First Industrial Realty Trust, Inc. (FR Quick QuoteFR – Free Report), STAG Industrial, Inc. (STAG Quick QuoteSTAG – Free Report) and Gladstone Commercial Corporation (GOOD Quick QuoteGOOD – Free Report) ) — you might want to consider as our model shows it has the right combination of elements to report a surprise this quarter.

First Industrial Realty Trust is expected to report quarterly earnings on February 8th. FR has an Earnings EVP of +7.65% and currently carries a Zacks Rank of 3. You can see the full list of today’s Zacks #1 Rank stocks here.

Scheduled to report quarterly numbers on February 15th, STAG Industrial has an Earnings EVP of +2.89% and carries a Zacks Rank of 2.

Gladstone Commercial Corporation is expected to report quarterly earnings on February 22nd. GOOD has an Earnings EVP of +5.13% and currently has a Zacks Rank of 1.

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

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) – a widely used metric to measure the performance of REITs.