Aimco (AIV) To Report Q1 Earnings: Is A Beat In The Cards?

Apartment Investment & Management Co. (NYSE:AIV) — commonly known as Aimco — is slated to report first-quarter 2018 results on May 7, after the market closes. While funds from operations (FFO) per share will likely increase on a year-over-year basis, revenues are expected to decline.

In the last reported quarter, this Denver, CO-based residential real estate investment trust (REIT) met the Zacks Consensus Estimate for FFO.
Results displayed growth in same-store property NOI and lease-up of redevelopment and acquisition communities. However, these positives were partially offset by loss of income from apartment sales in 2016.

Aimco has a mixed earnings surprise history. Over the trailing four quarters, the company outpaced the Zacks Consensus Estimate on two occasions and reported in-line numbers on the other two. Overall, the stock witnessed an average positive surprise of 0.82%. This is depicted in the chart below:

Apartment Investment and Management Company Price and EPS Surprise

Shares of Aimco have outperformed the industry. While the company’s shares have lost 7.4%, the industry has witnessed a decline of 8% over the last six months.

Factors to Influence Q1 Results

Per the latest report from the real estate technology and analytics firm — RealPage, Inc. (NASDAQ:RP) — the national apartment market moderated in first-quarter 2018, with occupancy shrinking slightly and rent growth slowing down. Nevertheless, the first quarter marked a slow-leasing period, thanks to the cold weather that inhibits shift of households and limits growth in demand.

Going by statistics, the annual rent growth shrunk to 2.3% in the first quarter. This marked moderation from the 2.6-2.9% growth rate experienced throughout 2017. Occupancy level of 94.5% in March edged down from the prior-year tally of 95%, with metros having subdued construction activity faring well and recording the strongest occupancy. Nevertheless, the overall occupancy level is still healthy.

Furthermore, Aimco has a diversified portfolio, both in terms of geography and price point. This is likely to aid the company to meet the increase in demand for apartment properties from echo boomers — children of the baby-boomer generation — in the to-be-reported quarter.

Also, Aimco has been making concerted efforts to revamp its portfolio through property sales and by reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth.

While such streamlining efforts are a strategic fit for the long term, the near-term dilutive effect cannot be bypassed. In fact, such short-term impact is likely to drag the company’s quarterly results.

Further, there is an increasing apartment supply in a number of the company’s markets. This high supply is likely to put pressure on rental rates and adversely affect revenue growth in the to-be-reported quarter.

Prior to the first-quarter earnings release, there is a lack of any solid catalyst for raising optimism about the company’s business activities and prospects. Over the past month, the Zacks Consensus Estimate for FFO per share in the soon-to-be-reported quarter remained unchanged at 60 cents. This indicates a 3.5% increase year over year. For the first quarter, management projects pro-forma FFO per share in the band of 57-61 cents.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $243.7 million, indicating a year-over-year decline of 1.1%.

Earnings Whispers

Our proven model shows that Aimco has the right combination of the two key ingredients —positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat in the first quarter.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Aimco has an Earnings ESP of +0.24%, representing the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.

Zacks Rank: Aimco carries a Zacks Rank #3.

Other Stocks That Warrant a Look

Here are a few other stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

HCP Inc. (NYSE:HCP) , scheduled to report quarterly numbers on May 3, has an Earnings ESP of +0.22% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sabra Health Care REIT (NYSE:WELL), Inc. (NASDAQ:SBRA) , set to release first-quarter results on May 9, has an Earnings ESP of +1.36% and a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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