It has been about a month since the last earnings report for Mid-America Apartment Communities (MAA). Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Mid-America Apartment Communities due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Mid-America Q4 FFO & Revenues Miss Estimates Amid High Supply
MAA reported a fourth-quarter 2024 core FFO per share of $2.23, which missed the Zacks Consensus Estimate of $2.24. The reported figure fell 3.9% year over year from $2.32.
Results reflected a record level of new supply deliveries, though continued strong demand provided some support. However, the company witnessed low levels of resident turnover. The REIT also provided its initial outlook for 2025.
Rental and other property revenues of $549.8 million for the fourth quarter missed the Zacks Consensus Estimate of $552.5 million. However, the reported figure was 1.4% higher than the year-ago quarter’s tally.
For the full-year 2024, the core FFO per share came in at $8.88, lower than the prior-year tally of $9.17 and below the Zacks Consensus Estimate of $8.89. However, rental and other property revenues increased 2% to $2.19 billion, in line with the consensus mark.
Quarter in Detail
The same-store portfolio’s revenues fell 0.2% on a year-over-year basis, with a decline of 0.5% in the average effective rent per unit. The same-store portfolio’s property operating expenses rose 3.4% on a year-over-year basis. The same-store portfolio’s NOI fell by 2.1% on a year-over-year basis.
The average physical occupancy for the same-store portfolio in the fourth quarter was 95.6%, which was slightly up from 95.5% in the year-ago quarter.
As of Dec. 31, 2024, resident turnover remained historically low at 42.0% on a trailing 12-month basis. This stemmed from record low levels of move-outs related to buying single-family homes.
During the fourth quarter, same-store portfolio lease pricing for new leases declined 8.0%, while lease pricing for renewing leases increased 4.2%. As a result, there was a decrease of 2% for both new and renewing lease pricing on a blended basis in the fourth quarter of 2024 compared to the prior lease.
Portfolio Activity
In October 2024, MAA bought a newly built 386-unit multifamily community in Dallas, TX for roughly $106 million. Moreover, in December, MAA acquired a 3-acre land parcel in the Raleigh, NC market for $5 million for future development.
During the fourth quarter of 2024, MAA closed on the disposition of a 216-unit multifamily community in Charlotte, NC and a 272-unit multifamily community in Richmond, VA, for combined net proceeds of $85 million. This led to a combined gain on the sale of depreciable real estate assets of $55 million.
As of Dec. 31, 2024, MAA had seven communities under development, with 2,312 units at a total projected cost of $851.5 million and an estimated $374.3 million remaining to be funded.
In 2024, MAA has redeveloped 5,665 apartment units. As of Dec. 31, 2024, MAA completed the installation of Smart Home technology in more than 96,000 units across its apartment community portfolio. This move provided an increase in the average effective rent per unit of around $25 per month since the initiative started during the first quarter of 2019.
Balance Sheet Position
MAA exited 2024 with cash and cash equivalents of $43.0 million, up from $41.3 million recorded as of Dec. 31, 2023. As of Dec. 31, 2024, MAA had a strong balance sheet with $1.0 billion in combined cash and capacity available under its unsecured revolving credit facility. It had a net debt/adjusted EBITDAre ratio of 4.0 times.
As of the same date, the total debt outstanding was $5.0 billion. Its total debt average years to maturity was 7.3 years. As of Dec. 31, 2024, unencumbered NOI was 95.9% of the total NOI.
2025 Guidance
MAA projects a first-quarter 2025 core FFO per share in the band of $2.08-$2.24, with $2.16 at the midpoint. The REIT expects its 2025 core FFO per share in the range of $8.61-$8.93, with the midpoint being $8.77.
For 2025, management anticipates same-store property revenue growth of -0.35% to 1.15% and operating expense growth of 2.45% to 3.95%. As a result, the same-store NOI growth is anticipated between -2.15% and -0.15%. Average physical occupancy for the same-store portfolio is guided in the range of 95.3% to 95.9%, with the midpoint being 95.60%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Mid-America Apartment Communities has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Mid-America Apartment Communities has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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