Apartment Investment (AIV) Up 2.4% Since Earnings Report: Can It Continue?

About a month has gone by since the last earnings report for Apartment Investment and Management Company (NYSE:AIV) . Shares have added about 2.4% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Aimco Q3 FFO Beats Estimates on Robust NOI Growth

Aimco reported third-quarter 2017 pro forma FFO of 63 cents per share, beating the Zacks Consensus Estimate by a cent. The figure also indicates a 14.5% increase from the year-ago quarter tally of 55 cents.

Results display growth in property net operating income (NOI) supported by same-store properties, and lease-up of redevelopment and acquisition communities. The company also benefited from reduced overhead costs. However, this positive was partially offset by the loss of income from apartment sales in 2016.

Total revenues of $254.6 million comfortably outpaced the Zacks Consensus Estimate of $249.2 million. In addition, the reported figure came in 2.3% higher than the prior-year quarter tally of $248.9 million.

Quarter in Detail

Same-store revenues increased 2.8% year over year to $148.2 million, while expenses edged down 1.1% year over year to $42.3 million. Consequently, same-store net operating income (NOI) climbed 4.5% to $105.9 million on a year-over-year basis.

Same-store average daily occupancy expanded 20 basis point (bps) year over year to 96.0%. Rental rates on new leases were up 1.4% and on renewals were up 4.5% from the expiring lease rates.

As of Sep 30, 2017, Aimco held cash and restricted cash on hand of $86 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities came in at around $1.8 billion, marking denoting an increase of about 12% from the beginning of the year.

Further, at the end of the quarter, Aimco’s outstanding borrowings on its revolving credit facility were $356 million and available capacity was $232 million, after considering $12 million of letters of credit backed by the facility.

Portfolio Activity

During the reported quarter, Aimco invested $33 million in redevelopment and development.

In addition, Aimco is revamping its portfolio through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth.

Through these efforts, the company increased its revenue per apartment home by 6% to $2,075. Additionally, it enhanced the quality and expected growth rate of its portfolio. Specifically, the percentage of A, B and C+ home came in at 53%, 34% and 13% in third-quarter 2017 compared with 51%, 37% and 12%, respectively, recorded in the year-ago quarter.

Guidance

For fourth-quarter 2017, Aimco provided pro forma FFO per share guidance in the band of 60- 64 cents.

For full-year 2017, the company narrowed its pro forma FFO per share guidance to $2.42-$2.46 from $2.40-$2.48 provided earlier. The company’s full-year guidance is backed by same-store revenue growth assumptions of 3.10-3.50% and NOI increase of 4.00-4.50%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

VGM Scores

At this time, the stock has a subpar Growth Score of D, however its Momentum is doing a bit better with an C. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.