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UDR Readies to Report Q3 Earnings: What's in the Offing for the Stock?
UDR Inc. UDR, a premier multifamily real estate investment trust (REIT), is set to announce its third-quarter 2024 results after the closing bell on Oct. 30. While its quarterly results are likely to reflect growth in revenues, funds from operations (FFO) per share might decline.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
In the last reported quarter, this Denver, CO-based residential REIT came up with an FFO as adjusted per share of 62 cents, which surpassed the Zacks Consensus Estimate of 61 cents. Quarterly results reflected an increase in revenues from same-store communities.
In the last four quarters, UDR’s FFO as adjusted per share met the Zacks Consensus Estimate on three occasions and surpassed on the other, the average surprise being 0.41%. The graph below depicts the surprise history of the company:
United Dominion Realty Trust, Inc. Price and EPS Surprise
United Dominion Realty Trust, Inc. Price and EPS Surprise
United Dominion Realty Trust, Inc. price-eps-surprise | United Dominion Realty Trust, 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 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.
UDR: Factors to Consider
UDR’s portfolio consists of a geographically diverse range of A/B quality properties across urban and suburban markets in key U.S. regions, including coastal and Sunbelt areas. The company’s strategic investments in technology and process efficiencies, part of its Next Generation Operating Platform, are anticipated to improve cost management and drive margin growth by enhancing digital interactions and resident services. Its robust balance sheet is likely to have supported expansion initiatives.
However, increased rental unit supply in some markets has heightened competition, somewhat dampening rent growth and impacting quarterly performance. Rising interest expenses may also have weighed on the results.
Projections for UDR
Per UDR’s September Investor Presentation, operating metrics are tracking along typical seasonal trends. Blended lease rate growth for the third quarter through August was at 2.1%, exceeding the second-half guidance of 0.9%, with renewal rates up by 5% (100 bps above the first half) and resident turnover down 300 bps year over year. The residential REIT noted that the third quarter is expected to show the lowest year-over-year same-store revenue growth in 2024 due to challenging comparisons, trailing 12-month blends and occupancy changes from near-record levels.
The Zacks Consensus Estimate for quarterly revenues is currently pegged at $416.51 million. This indicates a 1.6% year-over-year rise.
For the third quarter, we estimate weighted average same-store physical occupancy at 96.9%, up 10 basis points sequentially. Moreover, our estimate for same-store net operating income growth is currently pegged at 1.2%. We expect interest expenses to grow 7.3% year over year in the third quarter.
UDR projected a third-quarter 2024 FFO as adjusted per share in the range of 61-63 cents.
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 as adjusted per share has remained unchanged at 62 cents in the past month. This suggests a decline of 1.59% year over year.
Here is What Our Quantitative Model Predicts for UDR:
Our proven model does not conclusively predict a surprise in terms of FFO per share for UDR 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.
UDR currently carries a Zacks Rank of 2 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 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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