Post Properties, Inc. - Growth & Income
10 Maggio 2012 - 2:00AM
Zacks
Post Properties, Inc. (PPS) continues to benefit from a
decline in home ownership rates in the United States.
The apartment REIT delivered a 21% positive
earnings surprise for the first quarter on higher occupancy rates
and average monthly rents. It was Post's 11th consecutive positive
earnings surprise.
Management also raised its guidance higher for
2012, prompting analysts to revise their estimates significantly
higher. It is a Zacks #2 Rank (Buy) stock.
In addition to strong earnings growth potential,
Post pays a dividend that yields 1.7%.
Company Description
Post Properties is an apartment REIT that develops
and operates upscale multifamily communities. The company owns
interests in 21,622 apartment units in 58 communities.
Potential home buyers have become increasingly
gun-shy about buying real estate as home prices have collapsed
across the country. Additionally, credit is harder to come by than
it was a few years ago, and lenders are also requiring bigger down
payments to mitigate their risk. These factors are driving more and
more households into the rental market.
With homeownership rates declining, apartment
occupancy rates have been rising. This has led to an increase in
rental rates, a trend that should continue for the next several
years.
First Quarter Results
Post Properties, Inc. delivered impressive first
quarter results on May 7. Funds from operation (FFO) came in at 64
cents, beating the Zacks Consensus Estimate by 11 cents. It was a
stellar 73% increase over the same quarter last year.
Total revenues rose 9% to $80 million, ahead of the
consensus of $78 million. This was driven by higher occupancy rates
and rents. Same-store occupancy rates rose from 94.8% in the first
quarter of 2011 to 95.8% while the average monthly rental rate
increased a solid 6.2%.
Meanwhile, net operating income rose 11% as the
company leveraged its fixed expenses.
Outlook
Following strong Q1 results, management raised its
guidance for the remainder of 2012. The company now expects FFO per
share of $2.26-$2.38, up from previous guidance of $2.12-$2.28.
This prompted analysts to revise their estimates higher, sending
the stock to a Zacks #2 Rank (Buy).
As you can see below, consensus estimates have been
soaring over the last few months as the company has delivered 11
straight earnings beats:
![PPS: Post Properties, Inc. Dividend History PPS: Post Properties, Inc.](http://www.zacks.com/images/upload_dir/1336586965.jpg)
The Zacks Consensus Estimate for 2012 is now $2.27,
within guidance, and representing 16% growth over 2011 FFO. The
2013 consensus estimate is currently $2.43, corresponding with 7%
growth.
Dividend
As a REIT, Post Properties must pay the majority of
its income to shareholders in the form of dividends to avoid paying
taxes on that money.
The company slashed its dividend during the Great
Recession but raised it by 10% in 2011. It currently yields
1.7%.
Valuation
Shares of Post Properties are not cheap, trading at
21x 12-month forward earnings. But this is only slightly above its
10-year historical median of 20x, so it's not unreasonable.
The Bottom Line
As more and more Americans choose to rent rather
than buy, apartment companies like Post Properties should continue
to benefit for years to come. With rising earnings estimates,
strong growth projections, a 1.7% dividend yield and reasonable
valuation, Post offers plenty to like.
Todd Bunton is the Growth & Income Stock
Strategist for Zacks Investment Research and Editor of the Income
Plus Investor service.
POST PPTYS INC (PPS): Free Stock Analysis Report
POST PPTYS INC (PPS): Free Stock Analysis Report
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