On Wednesday, CFRA has updated its assessment of Equity Residential (NYSE:EQR), raising the real estate investment trust's (REIT) price target from $81.00 to $84.00. The firm maintains a "Buy" rating on the stock, citing confidence in the improvement of EQR's rental markets in the upcoming year.
According to InvestingPro data, EQR is trading near its 52-week high of $78.83, with an impressive year-to-date return of 24.63%. The company's current market capitalization stands at $28.89 billion, making it a prominent player in the Residential REITs industry.
The analyst from CFRA supports this positive outlook with a projection that Equity Residential's price to funds from operations (P/FFO) ratio will align closely with the multi-family REIT average, which stands at 20.1x, setting EQR's forward P/FFO at 20.7x.
The firm's forecasts for EQR's funds from operations (FFO) remain unchanged at $3.90 for 2024, matching the consensus estimate, and at $4.05 for 2025, slightly above the consensus of $4.02. InvestingPro analysis shows the company maintains a GOOD financial health score of 2.71, with particularly strong marks in profitability and price momentum.
Equity Residential's markets, which include affluent areas compared to those of Sun Belt REITs, are noted for having a lower ratio of monthly lease costs to tenants' household income.
This is seen as an advantageous position for EQR. Additionally, the company's properties in San Francisco and Seattle are experiencing a recovery, driven by job growth that is increasing demand for rental housing.
The limited new supply in coastal urban markets is also working in EQR's favor, where it has a significant presence. The company's cash net operating income (NOI) increased by 2.5% year-over-year in the third quarter, and guidance for the full year of 2024 is set for an increase of 3.0% to 3.5%. The September monthly data is particularly encouraging, showing cash NOI up by 3.7% year-over-year with an improvement in revenue by the same percentage and a more modest increase in expenses of 2.3%.
The third-quarter cash NOI by market revealed the strongest performances in Boston (5.4%), Washington D.C. (5.8%), and San Diego (5.2%), while Seattle (0.5%), Denver (0.6%), and San Francisco (1.9%) showed more modest growth. The report also highlighted Equity Residential's dividend yield, which stands at 3.65%.
Notably, InvestingPro data reveals that EQR has maintained dividend payments for 32 consecutive years, demonstrating remarkable consistency in shareholder returns. For detailed analysis and additional insights, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Equity Residential showcased a solid Q3 performance, underlining its resilience amid market shifts. The company reported robust revenue growth, driven by high demand and limited new supply in key markets, with net effective rents approximately 2% above the previous year. The company's strategic acquisitions in Atlanta, Dallas, and Denver are expected to enhance cash flow. The use of AI in customer service is set to improve operational efficiency.
Stifel, a financial services firm, upgraded Equity Residential stock from Hold to Buy, indicating a positive outlook on the company's growth potential. The company's forecasted compound annual growth rate (CAGR) for funds from operations (FFO) between 2024 and 2026 is estimated at 4.2%, slightly above the peer average of 3.9%.
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