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Where Does Equity Residential Stand after 2Q17 Earnings?

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Where Does Equity Residential Stand after 2Q17 Earnings? PART 1 OF 8

Where Does Equity Residential Stand after 2Q17 Earnings?

2Q17 results backed by rent growth

Equity Residential reported core funds from operation (or FFO) of $0.77 per share, which was in line with Wall Street estimates. Adjusted FFO also went up compared to the year-ago results of $0.76 on rent growth, higher occupancy, and upside margins during the quarter.

Where Does Equity Residential Stand after 2Q17 Earnings?

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Earnings per share of $0.53 surpassed estimates by a remarkable 62%. Results, however, were lower than in the corresponding period last year at $0.59 mainly due to the dilution of profit resulting from the disposition of several assets.

Higher same-store net operating income (or NOI), higher lease NOI, and lower corporate expense were partially offset by higher interest expense and dilution due to dispositions during the quarter.

EQR posted rental revenue of $612.3 million, marginally beating Wall Street’s estimates by 0.6%. However, rental revenue came in 3.0% higher at $594.9 million in comparison to a year ago. Total revenue of $612.5 million also compared favorably with $595.1 million reported a year ago. The top-line growth was a result of higher occupancy and strong demand for rental apartments in coastal markets.

Higher-than-expected top-line growth was driven by a 250-basis-point increase in the renewal rate, which surpassed expectations. New leases rose 1.4%, which was lower than management’s expectations mainly due to a soft lease environment in Washington.

Management comments

In its press release on July 25, 2017, Equity Residential president and CEO, David Neithercut, stated, “Strong and steady demand for rental housing in our gateway, coastal markets continues to drive high occupancy, retention and renewal pricing despite elevated levels of new supply.”

AvalonBay Communities (AVB), Camden Property (CPT), and Essex Property (ESS) are expected to report adjusted FFO of $2.11, $1.12, and $2.91 per share, respectively, for fiscal 2017.

Equity Residential and its peers make up almost 9% of the Vanguard REIT ETF (VNQ), which has a wide product portfolio covering industries like health care, self storage, and residential REITs. VNQ has a net asset value of $81.2 million.

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