Apartment Investment Management (AIV) Down 10% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Apartment Investment Management (AIV). Shares have lost about 10% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Apartment Investment Management due for a breakout? 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 drivers.

Aimco Meets FFO Estimates in Q4, Issues '20 Outlook

Aimco reported fourth-quarter 2019 pro forma FFO of 65 cents per share, meeting the Zacks Consensus Estimate. Also, the figure improved 5% from the year-ago quarter tally of 62 cents.

Quarterly results benefited from decent growth in same-store property NOI, higher occupancy and increase in rents.

Notably, total revenues of $230.03 million in the reported quarter missed the Zacks Consensus Estimate of $230.53 million. Further, the revenue figure came in 0.8% lower than the prior-year quarter’s reported tally.

For full-year 2019, the FFO per share came in at $2.5, in line with the Zacks Consensus Estimate and 2% higher than the prior-year tally of $2.45. However, total revenues witnessed a 6% decline, year over year, to $914.3 million.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 3.3% year over year to $174.8 million, while expenses (net of utility reimbursements) flared up 4.4% to $44 million. Consequently, same-store NOI climbed 2.9% year over year to $130.8 million.

Same-store average daily occupancy expanded 40 basis points (bps) year over year to 97.4%. Rental rates on new leases inched up 0.7%, whereas renewal rental rates increased 5%.

As of Dec 31, 2019, Aimco had cash and restricted cash of $177 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $2.4 billion.

Furthermore, at the end of the fourth quarter, Aimco had borrowing capacity of $518 million under its revolving credit facility, after consideration of $7 million of letters of credit backed by the facility.

Portfolio Activity

During the October-December period, Aimco disposed four apartment communities consisting of 991 apartment homes. Net proceeds of $201 million were generated from these sales.

During the reported quarter, Aimco invested $58 million in redevelopment and development activities. In addition, the company is revamping its portfolio through property sales, and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-anticipated growth.
Through these moves, Aimco increased its average revenues per apartment home by 7% to $2,272. However, NOI margin improved to 74% from the year-ago quarter’s 73%. The company’s percentage of A, B and C+ home was 54%, 29% and 17%, respectively, in fourth-quarter 2019.

Guidance

For full-year 2020, the company has provided pro forma FFO per share guidance of $2.62-$2.72.

The company’s full-year projections are backed by assumptions of same-store revenue growth of 3-3.8% and same-store expense growth of 1.6-2.4%, resulting in same-store NOI improvement of 3.2-4.6%.

For first-quarter 2020, Aimco has issued pro forma FFO per share guidance of 64-68 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Apartment Investment Management has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Apartment Investment Management has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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