What's In The Cards For Aimco This Earnings Season?

Apartment Investment & Management Co. AIV — commonly known as Aimco — is slated to report fourth-quarter and 2017 results on Feb 2, after the market closes. Revenues and funds from operations (FFO) per share are expected to grow year over year.

Last quarter, FFO of this residential real estate investment trust (REIT) surpassed the Zacks Consensus Estimate. Results displayed growth in property net operating income (NOI) supported by same-store properties, and lease-up of redevelopment and acquisition communities. The company also benefited from reduced overhead costs. However, this positive was partially offset by the loss of income from apartment sales in 2016.

Nevertheless, Aimco has a mixed earnings surprise history. Over the trailing four quarters, the company outpaced the Zacks Consensus Estimate on two occasions and reported in-line numbers in the other two quarters. Overall, the stock witnessed an average positive surprise of 0.82%. This is depicted in the chart below:

Apartment Investment and Management Company Price and EPS Surprise

Shares of Aimco have underperformed the industry. While the company's shares have lost 9%, the industry has witnessed a decline of 8.7% over the last six months.

Factors to Influence Q4 Results

Per a study by the real estate technology and analytics firm RealPage, the U.S. apartment market reported moderate rent growth for the calendar year 2017 and seasonal pricing cuts in the fourth quarter. While U.S. apartment rents increased at a modest rate of 2.5% in 2017, effective rents for new leases edged down 0.9% during the quarter. Admittedly, the levels of rent growth have moderated from the earlier years. However, national apartment occupancy came in at 95.1% at the end of the fourth quarter, remaining stable year over year.

Furthermore, Aimco has a diversified portfolio both in terms of geography and price point. This is likely to aid the company to meet the increase in demand for apartment properties from echo boomers — children of the baby-boomer generation — in the to-be-reported quarter.

Also, Aimco has been making concerted efforts to revamp its portfolio through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth.

While such streamlining efforts are a strategic fit for the long term, the near-term dilutive effect cannot be bypassed. In fact, such short-term impact is likely to drag the company's quarterly results.

Further, there is an increasing apartment supply in a number of the company's markets. This high supply is likely to put pressure on rental rates and adversely affect revenue growth in the to-be-reported quarter.

Prior to the fourth-quarter earnings release, there is lack of any solid catalyst for raising optimism about the company's business activities and prospects. As such, the Zacks Consensus Estimate for FFO per share in the soon-to-be-reported quarter remained unchanged at 63 cents, over the past month. Nevertheless, this indicates a 5% increase year over year. For the fourth quarter, management projects pro forma FFO per share in the band of 60-64 cents.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $249.8 million, indicating a year-over-year improvement of 0.12%.

For full-year 2017, the Zacks Consensus Estimate for revenues stands at $988.7 million. The consensus estimate for FFO per is $2.45, reflecting a year-over-year increase of 5.6%. Further, management expects FFO per share in the range of $2.42-$2.46.

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