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Why You Should Hold Mid-America Apartment (MAA) Stock Now

Mid-America Apartment Communities MAA, also known as MAA, is poised to benefit with a well-diversified portfolio in terms of markets, submarkets, product types and price points. However, elevated supply, particularly among the apartment communities located in the urban submarkets, is concerning.

The residential REIT is witnessing growth in demand and rent in its Sun Belt-focused portfolio, backed by favorable in-migration trends of jobs and households in the region. MAA opts for opportunistic investments to maintain the right product mix and raise the number of apartment communities in the dynamic markets.

MAA continues to implement its three internal investment programs, such as interior redevelopment, property repositioning projects and Smart Home installations. The programs will help the company capture an upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base.

This Sunbelt-focused apartment REIT also enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of Sep 30, 2021, $1 billion of combined cash and capacity was available under its unsecured revolving credit facility, net of commercial paper borrowings. This enables it to navigate any negative externalities.

Shares of this presently Zacks Rank #2 (Buy) MAA have rallied 7.3% over the past three months, outperforming the industry’s growth of 3.7%. Additionally, the Zacks Consensus Estimate for 2021 funds from operations (FFO) per share has moved up 1.3% in the past two months.

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However, the new supply of residential properties has been high for the past few years. This increased supply adversely impacts landlords’ capability to demand more rents, thus resulting in lesser absorption, particularly among the apartment communities located in the urban sub-markets. Moreover, stiff competition in the residential real-estate market curtails MAA’s power to raise the rent or increase occupancy, inducing aggressive pricing for acquisitions.

While development and redevelopment activities are accretive to long-term value creation, the same requires huge capital outlays. An extensive development pipeline heightens MAA’s operational risks, exposing it to construction cost overruns, entitlement delays and lease-up risks.

Other Stocks to Consider

Some other top-ranked stocks from the REIT sector are Camden Property Trust CPT, Centerspace CSR and UDR Inc. UDR.

Camden Property carries a Zacks Rank of 2 at present. Shares of CPT have gained 12.2% in the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Camden Property’s 2021 FFO per share has been raised marginally over the past month. Over the last four quarters, CPT’s FFO per share surpassed the consensus mark on three occasions, missing the mark on the remaining one, the average negative surprise being 0.02%.

Centerspace has a Zacks Rank of 2 at present. Shares of CSR have gained 11.5% in the past six months.

The Zacks Consensus Estimate for Centerspace’s 2021 FFO per share has been raised 1.5% over the past two months. Over the last four quarters, CSR’s FFO per share surpassed the consensus mark on all occasions, the average beat being 6.7%.

The Zacks Consensus Estimate for UDR’s 2021 FFO per share has been raised 1.9% in the past two months. Over the last four quarters, UDR’s FFO per share was in line with the consensus mark on three occasions while missing the mark on the remaining one, the average negative surprise being 0.5%.

Currently, UDR carries a Zacks Rank of 2. Shares of UDR have appreciated 6.8% in the past three months.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.


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United Dominion Realty Trust, Inc. (UDR): Free Stock Analysis Report
 
MidAmerica Apartment Communities, Inc. (MAA): Free Stock Analysis Report
 
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