Mid-America Apartment Communities MAA, commonly known as MAA, is expected to witness high demand for its properties, stemming from robust job growth in the core markets. However, the company’s portfolio is concentrated in the Southeast and Southwest regions of the United States. This exposes it to economic and political doldrums prevailing in the area.

This Sunbelt-focused apartment real estate investment trust (REIT) opts for opportunistic investments to maintain the right product mix and raise the number of apartment communities in dynamic markets. In fact in December 2016, the company merged with Post Properties that created a combined entity with a larger presence in targeted markets. MAA’s strong balance sheet with lower leverage and well-laddered debt maturities, offer scope for further expansion.

The company is set to witness increased demand, supported by the growth of prime age groups for rentals and immigration. This, along with a solid portfolio, positions the company to enjoy higher occupancy and effective rent per unit.    

MAA reported better-than-expected results in third-quarter 2017 with regard to funds from operations (FFO). It witnessed robust revenue growth in large as well as secondary markets. Subsequently, the company lifted full-year FFO per share outlook, revising it from the previous range of $5.77-$5.97 to $5.84-$5.94.

Moreover, shares of MAA have outperformed the industry it belongs to, year to date. MAA’s shares gained 6.8% compared with 4.7% growth recorded by the industry.

Nonetheless, new supply of residential properties in a number of markets, specifically in high priced-point and urban locations continue to hamper MAA’s leasing activities. This high supply adversely impacts the landlord’s capability to demand more rent and results in lesser absorption.

Also, stiff competition in the residential real estate market with various housing alternatives like single-family housing, manufactured housing, condominiums and the new and existing home markets might dent any near-term revenue growth prospects. 

Moreover, the Zacks Consensus Estimate for full year FFO was revised downward by a cent over a month, reflecting analysts’ bearish sentiments.

MAA currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the REIT space are Extra Space Storage EXR, DCT Industrial Trust DCT and Paramount Group PGRE. All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extra Space Storage’s FFO per share estimates for 2017 was revised upward to $4.31 over a month. Its share price has rallied 13.5% year to date.

DCT Industrial Trust’s current-year FFO per share estimates have been revised upward by a cent to $2.44 in a month’s time. It share price has increased 28.3% year to date.

Paramount’s 2017 FFO per share estimates have remained unchanged at 88 cents over the past 30 days. Its share price has declined 3.1% year to date.

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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Mid-America Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
 
Extra Space Storage Inc (EXR) : Free Stock Analysis Report
 
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