Mid-America Apartment Communities MAA — commonly known as MAA — is a real estate investment trust (REIT) that focuses on owning, operating and acquiring apartment communities throughout the southeast, southwest and mid-Atlantic regions of the United States. MAA is slated to report fourth-quarter and full-year 2024 results on Feb. 5, after market close.
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The Germantown, TN-based residential REIT delivered a positive surprise of 1.38% in terms of core funds from operations (FFO) in the last reported quarter. Results reflected healthy demand despite elevated new supply and strong average physical occupancy for the same-store portfolio. The company witnessed low levels of resident turnover. However, an increase in same-store portfolio property operating expenses partly marred the positives.
Over the trailing four quarters, MAA surpassed the Zacks Consensus Estimate on three occasions and missed once, the average beat being 0.68%. This is depicted in the chart below:
Mid-America Apartment Communities, Inc. Price and EPS Surprise
Mid-America Apartment Communities, Inc. Price and EPS Surprise
Mid-America Apartment Communities, Inc. price-eps-surprise | Mid-America Apartment Communities, Inc. Quote
Let’s see how things have shaped up before this announcement.
US Apartment Market in Q4
Per RealPage data, the U.S. apartment demand surged to its highest level in almost three years in the fourth quarter of 2024, comfortably surpassing the record-high new supply seen that year.
Between October and December 2024, the U.S. apartment market absorbed 230,819 market-rate units, while 155,408 new units were delivered during the same period. Annual supply hit 588,883 units, while demand led to 666,699 units.
As demand exceeded supply, U.S. apartment occupancy saw a notable annual increase, reaching 94.8% in December. The annual occupancy change was 0.7%. However, rent growth remained stagnant due to the pressure of historically high new supply levels. Rents rose 0.5% in 2024, and the monthly effective rent change was down 0.3%. The average effective rent was $1,823.
Factors to Consider Ahead of MAA’s Upcoming Results
MAA's diverse Sunbelt portfolio is expected to have gained from robust demand across its markets. The region's pro-business environment, lower taxes and less dense cities continue to drive job growth and in-migration, boosting rental demand. To stay competitive, MAA has been enhancing its properties with upgraded amenities and technology to attract and retain tenants.
The company is actively progressing on three internal investment initiatives — interior upgrades, property repositioning and Smart Home installations — designed to boost rent growth, generate strong returns and maximize earnings from its existing portfolio.
Nonetheless, elevated supply in several Sunbelt markets may have constrained the company's ability to raise rents or improve occupancy during the fourth quarter. Additionally, high interest rates present a challenge by driving up MAA's borrowing costs, potentially affecting its acquisition and development strategies.
Projections for MAA
The Zacks Consensus Estimate for quarterly revenues is pegged at $552.48 million. This suggests a 1.89% rise from the year-ago quarter’s reported figure.
For the fourth quarter, we project an average physical occupancy of 95.6%, down 10 basis points from the prior quarter. Moreover, our estimate indicates a 38.3% year-over-year increase in the company’s interest expenses.
MAA projected a fourth-quarter 2024 core FFO per share in the band of $2.15-$2.31, with $2.23 at the midpoint. Before the fourth-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has been unrevised at $2.24 in the past month. This also suggests a year-over-year decline of 3.45%.
For full-year 2024, MAA expected core FFO per share in the range of $8.80-$8.96, with the midpoint at $8.88. For the full year, the Zacks Consensus Estimate for core FFO per share has remained unrevised at $8.89 over the past month. However, the figure indicates a 3.05% decrease year over year on revenues of $2.19 billion.
For 2024, management anticipated same-store property revenue growth of 0.25%-0.75% and operating expense growth of 3.25%-4.25%. As a result, the same-store NOI growth is anticipated between -1.90% and -0.70%. Average physical occupancy for the same-store portfolio is guided in the range of 95.4%-95.6%, with the midpoint being 95.5%.
For the full year, we expect same-store property net operating income to fall 1.0% year over year. Meanwhile, we project an average physical occupancy of 95.5%, down 10 basis points from the prior year. Moreover, our estimate indicates a 19.1% year-over-year increase in the company’s interest expenses.
Here is What Our Quantitative Model Predicts for MAA:
Our proven model does not conclusively predict a surprise in terms of FFO per share for MAA this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
MAA currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of -0.03%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Ventas, Inc. VTR and Vornado Realty Trust VNO — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.
Ventas, scheduled to report quarterly numbers on Feb. 12, has an Earnings ESP of +0.89% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Vornado is slated to report quarterly numbers on Feb. 10. VNO has an Earnings ESP of +2.25% and carries a Zacks Rank of 3 at present.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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