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 third-quarter 2024 results on Oct. 30 after market close.
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The Germantown, TN-based residential REIT delivered a positive surprise of 0.91% in terms of core funds from operations (FFO) in the last reported quarter. Results reflected healthy demand despite elevated new supply and growth in the average effective rent per unit for the same-store portfolio. The company also experienced low levels of resident turnover. However, an increase in 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 0.44%. 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 Q3
Per RealPage data, the U.S. apartment demand remained impressive in the third quarter of 2024 despite a record number of new deliveries entering the market. As a result, rent growth stayed relatively subdued across the nation, continuing the trend observed over the past several months.
Between July and September 2024, the U.S. apartment market absorbed 192,649 market-rate units, while 162,595 new units were delivered during the same period. Annual supply hit 557,842 units, the highest since 1974, while demand trailed slightly at 488,773 units.
In the third quarter, nationwide, occupancy in market-rate apartments stood at 94.4%, a slight decline of just 10 basis points compared to the same period last year. Rents rose 0.2% year over year in September, and the monthly effective rent change was down 0.5%. The average effective rent was $1,838.
Factors to Consider Ahead of MAA’s Upcoming Results
MAA's well-diversified Sunbelt portfolio is positioned to capitalize on strong demand in its markets. The Sunbelt is appealing due to its business-friendly climate, lower taxes and lower-density cities, attracting job growth and in-migration, which fuels rental demand. MAA has been investing in its properties by upgrading amenities and technology to attract and retain tenants.
The company is advancing its three internal investment programs — interior redevelopment, property repositioning and Smart Home installations, aimed at driving rent growth, delivering accretive returns and enhancing earnings from its existing assets.
However, elevated supply levels in several Sunbelt markets may have limited the company’s ability to raise rents or increase occupancy in the third quarter. Furthermore, high interest rates pose a challenge by increasing MAA's borrowing costs, impacting its acquisition or development plans.
Projections for MAA
Per the September investor presentation, despite supply pressures, both new lease pricing and occupancy showed improvement through August compared to the second quarter of 2024. Per the investor presentation, since the beginning of the third quarter through Aug. 31, 2024, the company’s average daily physical occupancy was 95.7%, up from 95.5% in the second quarter of 2024.
For the same period, the same-store effective lease-over-lease average pricing growth for new leases was a decline of 4.8% compared with a fall of 5.1% in the second quarter. For renewals, it was up 4% compared with 4.6% in the second quarter. The blended lease rate was flat for the said period compared to a 0.1% increase in the second quarter.
The Zacks Consensus Estimate for quarterly revenues is pegged at $549.38 million. This suggests a 1.35% rise from the year-ago quarter’s reported figure.
For the third quarter, we expect same-store property net operating income to fall 3.2% year over year. Meanwhile, we project an average physical occupancy of 95.8%, up 30 basis points from the prior quarter. Moreover, our estimate indicates a 30.5% year-over-year increase in the company’s interest expenses.
MAA projected a third-quarter 2024 core FFO per share in the band of $2.08-$2.24, with $2.16 at the midpoint. Before the third-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been unrevised at $2.18 in the past month. This also suggests a year-over-year decline of 4.80%.
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 3 and has an Earnings ESP of 0.00%. 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 residential REIT sector — AvalonBay Communities, Inc. AVB and Independence Realty Trust, Inc. IRT — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.
AvalonBay Communities, scheduled to report quarterly numbers on Nov. 4, has an Earnings ESP of +0.72% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Independence Realty Trust is slated to report quarterly numbers on Oct. 30. IRT has an Earnings ESP of +1.94% and carries a Zacks Rank of 2 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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