Why Is Apartment Investment (AIV) Up 1% Since Its Last Earnings Report?

A month has gone by since the last earnings report for Apartment Investment and Management Company (NYSE:AIV) . Shares have added about 1% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is AIV 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’s Q1 FFO In Line With Estimates, Revenues Beat

Aimco reported first-quarter 2018 pro forma FFO of 60 cents per share, in line with the Zacks Consensus Estimate. The figure indicates a 3% increase from the year-ago quarter tally of 58 cents.

Results displayed growth in property NOI, supported by same-store properties, and lease-up of redevelopment and acquisition communities. However, these positives were partially offset by lower NOI from apartment sales in 2017 and 2018.

In the reported quarter, total revenues of $247.7 million comfortably outpaced the Zacks Consensus Estimate of $243.7 million. In addition, the reported figure came in marginally higher than the prior-year quarter tally of $246.5 million.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 2.6% year over year to $144.9 million while expenses (net of utility reimbursements) increased 2.1% from the prior-year quarter to $38.9 million. Consequently, same-store NOI climbed 2.7% to $106 million on a year-over-year basis.

Same-store average daily occupancy expanded 30 basis point (bps) year over year to 96.3%. Rental rates on new leases were up 0.4% whereas rental rates on renewal leases increased 4.9% from the expiring lease rates.

As of Mar 31, 2018, Aimco had cash and restricted cash on hand of $91 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $2 billion.

Further, at the end of the quarter under review, Aimco’s outstanding borrowings on its revolving credit facility were $79 million and available capacity was $509 million, after considering $12 million of letters of credit, backed by the facility.

Portfolio Activity

During the reported quarter, Aimco invested $47 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 revenues per apartment home by 7% to $2,052. Additionally, it enhanced the quality and expected growth rate of its portfolio. Specifically, the percentage of A, B and C+ home was 49%, 35% and 16%, respectively, in first-quarter 2018.

Guidance

For full-year 2018, the company updated its pro forma FFO per share guidance to $2.39-$2.49 from $2.42-$2.52 provided earlier.

The company projects same-store NOI growth to be in the range of 1.70-3.10% and revenue growth to be in the range of 2.10-3.10%.

For second-quarter 2018, Aimco provided pro forma FFO per share guidance of 57-61 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.

Apartment Investment and Management Company Price and Consensus

VGM Scores

At this time, AIV has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was also 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, AIV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.