Apartment Investment & Management Co. (NYSE:) – commonly known as Aimco – is slated to report first-quarter 2017 results on Apr 27, after the market closes.
Last quarter, this residential real estate investment trust (“REIT”) delivered an in-line performance. Results reflected conventional same-store property net operating (NOI) growth, higher contribution from development, redevelopment and acquisition activities, along with lower casualty losses. On the other hand, the company experienced loss of income from the sale of apartment communities and rise in interest expenses.
However, Aimco has a mixed earnings surprise history. Over the trailing four quarters, the company surpassed the Zacks Consensus estimate on two occasions, reported in-line numbers in one, and missed the mark in another. Overall, Aimco delivered an average positive surprise of 1.34%. This is depicted in the chart below.
Apartment Investment and Management Company Price and EPS Surprise
Apartment Investment and Management Company Price and EPS Surprise | Apartment Investment and Management Company Quote
Let’s see how things are shaping up for Aimco prior to this announcement.
Factors to Consider
Aimco has a solid portfolio diversified both in terms of geography and price point. This raises hopes of a relatively lesser impact on the top line in the first quarter, despite new supply in various markets. The company is also revamping its portfolio through property sales and re-investing the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth. This augurs well for long-term growth. Aimco’s balance sheet is also projected to improve.
However, even though it is a strategic fit on part of the company to sell non-core assets and buy property in higher-growth in-fill areas, the dilutive impact on earnings from such asset dispositions cannot be avoided either in the near term. In addition, there is stiff competition in its markets, thus, any robust improvement in rates and occupancy is unlikely.
For first-quarter 2017, Aimco projects pro forma funds from operation (“FFO”) per share in the band of 55–59 cents. The Zacks Consensus Estimate for the same is currently pegged at 58 cents.
Hence, prior to the first-quarter earnings release, there is lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share for the to-be-reported quarter remained unchanged at 58 cents over the past 60 days.
In addition, over the past three months, shares of Aimco underperformed the Zacks categorized REIT and Equity Trust – Residential industry. While Aimco’s shares fell 0.8%, the industry climbed 3.9% over this period.
Earnings Whispers
Our proven model does not conclusively show that Aimco will beat on earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as you will see below.
Zacks ESP: The Earnings ESP for Aimco is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 58 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Aimco’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that they have the right combination of elements to report a positive surprise this quarter:
Boston Properties Inc. (NYSE:) , slated to release first-quarter results on Apr 25, has an Earnings ESP of +0.67% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Public Storage (NYSE:) , scheduled to release earnings on Apr 26, has an Earnings ESP of +0.41% and a Zacks Rank #3.
EPR Properties (NYSE:) , slated to release earnings on May 2, has an Earnings ESP of +0.84% and a Zacks Rank #3.
Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. FFO, 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.
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