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What's in Store for Equity Residential in 2Q17?

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What's in Store for Equity Residential in 2Q17? PART 1 OF 9

What’s in Store for Equity Residential in 2Q17?

2Q17 performance

Equity Residential (EQR) is scheduled to report its fiscal 2Q17 earnings on July 25, 2017. Analysts expect it to report adjusted FFO (funds from operations) per diluted share of $0.76 for 2Q17 and $3.05 for fiscal 2017. It’s expected to report EPS (earnings per share) of $0.35.

What&#8217;s in Store for Equity Residential in 2Q17?

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The expectation for 2Q17 is flat compared to a year ago since higher renewal rates may be offset by a decline in new lease rates due to the ramp-up of the supply of new homes in the market. Equity Residential has successfully been able to maintain its leading position in the residential real estate sector. It has done so by repositioning its properties in Class A cities that have high-income growth and are in high emand for rental apartments.

Equity Residential also has several development and redevelopment projects in order to enrich its portfolio. In 2016, it completed $1.1 billion in development projects, a record for the company. It expects to complete $900.0 million in development projects in 2017.

According to guidance issued in the company’s 1Q17 earnings call, EQR expects to report EPS of $0.51–$0.55 for 2Q17. The midpoint of the guidance range, or $0.53, is higher than EPS of $0.39 in 2Q16. The enhanced expectation reflects higher expected profits on property sales.

EQR gave FFO guidance of $0.75–$0.79 per share for 2Q17. The midpoint of the guidance range, or $0.77, is higher than $0.74 reported in 2Q16, mainly due to higher same-store NOI (net operating income), higher lease NOI, and lower interest expense expected during the quarter.

Macro factors are the key to growth

The pro-American policy under President Donald Trump has resulted in a growth spurt in industrial activity, thus spiking a boom in the economy. An improving job market and higher interest rates are expected to drive momentum for EQR.

A strong start to 2017

Equity Residential started 2017 on a strong note. Its 1Q17 EPS was $0.39, surpassing its 1Q17 EPS of $0.12. It reported FFO of $0.74, which inched past the consensus estimate by 0.30%. FFO, however, came in below $0.76 per share reported in the previous year.

For fiscal 2016, EQR reported FFO of $3.06 per share. Its close peers AvalonBay Communities (AVB), Camden Property Trust (CPT), and Essex Property Trust (ESS) reported FFO of $8.26, $4.64, and $11.04 per share, respectively, for fiscal 2016.

Equity Residential, AvalonBay, Essex Property, and Camden Property together make up almost 9.0% of the Vanguard REIT ETF (VNQ). VNQ has a market cap–weighted index with a wide product portfolio covering industries such as healthcare, self-storage, and residential REITs. It has a net asset value of $81.2 million.

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