Mid-America Apartment Communities (MAA -0.95%), a leading multifamily real estate investment trust (REIT), released its earnings for the third quarter on Oct. 30. Revenue of $551.13 million exceeded analysts' consensus estimate of $548.53 million. However, earnings per share of $0.98 missed analysts' expectations of about $1.01. Though some setbacks from increased supply impacted pricing, the REIT's overall performance indicates stability, and illustrates its capacity to deliver stable financial outcomes amidst challenging market dynamics.
| Metric | Q3 2024 | Q3 2024 Analysts' Estimate | Q3 2023 | % Change |
|---|---|---|---|---|
| Revenue | $551.13 million | $548.53 million | $542.04 million | 1.7% |
| Earnings per share | $0.98 | $1.01 | $0.94 | 4.3% |
| Funds from operations per share | $2.10 | N/A | $2.16 | (2.8%) |
| Net operating income | $339.57 million | N/A | $342.82 million | (0.9%) |
Source: Analysts' estimates for the quarter provided by FactSet.
Business Overview and Strategy
Mid-America Apartment Communities owns and operates multifamily residential properties in high-demand markets across the Southeast, Southwest, and Mid-Atlantic regions of the United States. This diversified approach buffers it against regional economic variances. The REIT has a record of maintaining strong occupancy rates and stable revenue streams.
In the third quarter, Mid-America emphasized continued strategic acquisitions in high-growth markets including Orlando and Dallas, while optimizing its portfolio by exiting less lucrative markets such as Charlotte. It maintained high average occupancy rates at 95.7% and a historically low resident turnover rate of 42.8%.
Quarterly Performance Highlights
The company's acquisition and development initiatives remained on track, with eight communities under development amounting to a projected cost of about $1 billion. This positions Mid-America strategically for future market capture. Key operational metrics showed consistency, despite pressures; same-store performance saw no revenue growth, reflecting market pressures from new supply that constrained lease pricing adjustments. Insurance and tax costs compounded these challenges, increasing total operating expenses by 3.0%.
Funds from operations (FFO) per share saw a year-over-year decrease from $2.16 to $2.10 due to heightened supply pressures. Although these pressures impacted earnings, core operations proved resilient. Notably, net operating income recorded a slight decrease to $339.57 million compared to $342.82 million in the prior-year period.
Mid-America marked strategic progress with dispositions and development funding; as of September, it had $805.7 million in available capital from cash on hand and revolving credit facilities, ensuring its liquidity. During the quarter, Mid-America adjusted its full-year guidance to reflect moderated expectations against a backdrop of continuous market challenges and operational cost pressures.
The dividend remained on solid footing with a 66.2% core FFO payout ratio. However, ongoing supply challenges in key regional markets such as Austin and Atlanta required prudent management for sustaining tenant satisfaction and financial performance.
Outlook and Guidance
Mid-America's management conveyed a balanced but cautious outlook owing to the continuous influx of new housing supply, which affects its rent pricing. The company projects future demand will outpace supply, stabilizing the REIT's earnings growth in the longer term. Management expects its development pipeline will sustain the REIT's expansion momentum.
For the year, Mid-America maintained a conservative financial outlook with an earnings per share range of $4.37 to $4.65 and core FFO expectations holding at $8.88 per share midpoint. Investors are advised to monitor ongoing supply trends in the housing market and the REIT's cost structure management in the upcoming quarters.
