Mid-America Apartment Communities, Inc. MAA — commonly known as MAA — is slated to report first-quarter 2018 results on May 2, after the market closes.

In the last reported quarter, this Memphis, TN-based residential real estate investment trust (REIT) delivered a positive surprise with respect to funds from operations (FFO) per share of 1.35%. Quarterly results reflected growth in same-store property net operating income (NOI) and rise in average effective rent per unit for same-store portfolio.

The company beat the Zacks Consensus Estimate in each of the trailing four quarters, the average positive surprise being 1.71%. The graph below depicts this surprise history:

 

Mid-America Apartment Communities, Inc. Price and EPS Surprise

 

 

Let’s see how things are shaping up for this announcement.

Factors to Consider

Per the latest report from the real estate technology and analytics firm — RealPage, Inc. RP — the national apartment market moderated in first-quarter 2018, with occupancy shrinking slightly and rent growth slowing down. Nevertheless, the first quarter marks 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 Q1. 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.

MAA maintains a well-balanced portfolio with a solid presence in around 37 Metropolitan Statistical Areas (MSAs), located in the Southeast and Southwest regions of the United States. Further, favorable demographics and strong job growth in target markets are anticipated to drive demand for MAA’s properties. The Zacks Consensus Estimate for first-quarter total revenues is currently pegged at $385 million, denoting projected growth of 1.6% year over year.

However, there is an increasing apartment supply in a number of markets of the company. This high supply is likely to put pressure on rental rates in the to-be-reported quarter. In addition, there is high-concession activity amid elevated supply, which remains a concern.

Furthermore, MAA’s activities during the quarter under review were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate witnessed a marginal decline over the last 30 days. It is currently pegged at $1.46, which indicates no movement on a year-over-year basis.

For the quarter under review, MAA projects FFO per share in the range of $1.38-$1.48.

Earnings Whispers

Our proven model does not conclusively show that MAA is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

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

Zacks ESP: MAA has an Earnings ESP of +0.78%, representing the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.

Zacks Rank: MAA has a Zacks Rank #4 (Sell), which decreases the predictive power of ESP.

Moreover, we caution against stocks with Zacks Rank #4 or #5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks That Warrant a Look

Here are a few 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:

Amanda Hoffer Properties AHH, slated to release first-quarter results on May 1, has an Earnings ESP of +0.88% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Spirit Realty Capital SRC, scheduled to report quarterly numbers on May 1, has an Earnings ESP of +0.49% 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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RealPage, Inc. (RP): Free Stock Analysis Report
 
Mid-America Apartment Communities, Inc. (MAA): Free Stock Analysis Report
 
Spirit Realty Capital, Inc. (SRC): Free Stock Analysis Report
 
Armada Hoffler Properties, Inc. (AHH): Free Stock Analysis Report
 
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