Apartment Investment and Management Company (AIV) or Aimco, as the real estate investment trust (REIT) is popularly known, reported fiscal 2010 first quarter FFO (funds from operations) of 32 cents per share that exceeded the Zacks Consensus Estimate by 2 cents. Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Below we will cover the results of the recent earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the short term and long term outlook for the stock.
Earnings Report Review
During first quarter 2010, Aimco had a weighted average ownership of 92% in the conventional real estate portfolio. Same-store revenue in the conventional portfolio decreased $3.1 million or 1.8%, primarily due to lower average rent (down 5.5% or $59 per unit from $1,065 to $1,006). This was partially offset by higher average daily occupancy of 96.0% for first quarter 2010 compared to 93.3% for first quarter 2009.
Rental rates on new leases during the quarter were 7.0% lower than the expiring leases, while renewals were 0.1% higher than the expiring lease rates. In the affordable real estate portfolio, Aimco had a weighted average ownership of 62% during the quarter.
(Read our full coverage on this earnings report: Aimco FFO Dips Year Over Year)
Earnings Estimate Revisions – Overview
Estimates have moved slightly in the negative direction for Aimco since the earnings release, meaning that analysts were somewhat pessimistic about the current fiscal performance of the company. Let’s dig into the earnings estimate details.
Agreement of Analysts
In the last 7 days, fiscal 2010 estimates have been lowered by 1 analyst. Analysts in general are in consensus about the future outlook for Aimco’s earnings, as is visible below. Eight analysts have lowered their estimates for fiscal 2010, while only 1 has upwardly revised. For fiscal 2011, the picture is relatively better with 5 analysts raising their earnings estimates and only 1 lowering.
Magnitude of Estimate Revisions
Earnings estimates fell by 2 cents for fiscal 2010 from $1.29 to $1.27 since the earnings announcement. For fiscal 2011, earnings estimates have moved up 2 cents from $1.37 to $1.39. This is encouraging news for the company.
Aimco in Neutral Lane
The long-term estimate picture for Aimco is positive. Aimco is one of the leading multifamily REITs in the U.S., with a diversified portfolio of conventional, affordable and student housing communities. The company has a strong portfolio of Class ‘B’ and Class ‘C’ properties primarily catering to the middle-income market.
Aimco is also repositioning its portfolio to focus on fewer markets with higher growth potential, and is currently focusing on redevelopments to mitigate operating risk amid challenging macroeconomic environment. However, intense competition with other housing alternatives, and a weak Florida real estate market may weigh on the company’s top and bottom-lines.
Currently, Aimco shares are maintaining a Zacks #3 Rank, which translates to a short-term Hold recommendation. Our long-term recommendation for the stock also remains middle of the road at Neutral.
However, we remain bullish about one of its peers, Post Properties Inc. (PPS) and maintain a Zacks #1 Rank on it, which translates to a short-term Strong Buy rating. Our long-term recommendation for Post Properties also remains at Outperform as we anticipate the stock to perform well above the broader market.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
Read the full analyst report on “AIV”
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