Where Equity Residential Stands among Peers after Q2 Results

Anirudha Bhagat - Author

Jul. 30 2018, Updated 9:02 a.m. ET

Price-to-FFO multiple

Price-to-FFO (funds from operations) is considered the best valuation multiple for comparing REITs. The multiple’s implication is similar to the PE ratio. With a TTM (trailing-12-month) price-to-FFO multiple of 20.1x, Equity Residential (EQR) currently trades at a premium to its peers. Its competitors AvalonBay Communities (AVB), Camden Property (CPT), and UDR (UDR) have TTM price-to-FFO multiples of 19.8x, 19.7x, and 19.6x, respectively.

Equity Residential is also trading at a premium to its peers on the basis of Wall Street’s 2018 FFO expectations. The forward price-to-FFO ratios for AvalonBay Communities, Camden Property, and UDR are 20x, 19.2x, 19.1x, and 19.2x, respectively.

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Wall Street ratings

Over the last two months, analysts have maintained their “hold” recommendations for Equity Residential. As of July 26, two of the 22 analysts have provided a “strong buy” rating, two have given it a “buy,” 16 have recommended a “hold,” and two have rated it a “sell.” Wall Street analysts have given it a target price of $67.16, which represents a gain of 4.1% from the current market price of 64.54.

UDR, one of Equity Residential’s competitors, has a similar “hold” recommendation, while AvalonBay Communities and Camden Property Trust have mostly “buy” recommendations.

Five of the 23 analysts covering AvalonBay Communities have given it a “strong buy” recommendation, four have given it a “buy,” and 13 have given it a “hold.” Analysts’ target price of $184.50 represents a 7.1% increase from the current price of $172.27.

For Camden Property Trust, four of the 20 analysts tracking the stock have given it a “strong buy” recommendation, six have rated it a “buy,” and the remaining ten have given it a “hold.” With a target price of $93.05, Wall Street has forecast a 2.7% rise from the current market price of $90.59.

UDR got a “strong buy” recommendation from three of the 20 analysts covering the stock. One gave it a “buy” rating, and 16 recommended a “hold.” The target price of $38.59 is a 4.2% increase from the current market price of $37.02.

Equity Residential and its above peers make up ~19.6% of the NuShares Short-Term REIT ETF (NURE).


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