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On Tuesday, UBS analyst Michael Goldsmith confirmed a Buy rating on Equity Residential (NYSE:EQR) with a steady $84.00 price target. With a market capitalization of $26.51 billion and a "GOOD" Financial Health Score according to InvestingPro, Equity Residential stands as a prominent player in the Residential REITs industry. InvestingPro subscribers can access 5 additional key insights about EQR’s financial position and growth prospects. Goldsmith highlighted the company’s fourth-quarter 2024 results and its guidance for 2025, indicating a stable demand environment and a generally supportive macroeconomic backdrop. The full-year midpoint blended rate growth of 2.5% was seen as a positive sign, especially when compared to the 1.9% in 2024. The company’s solid performance is supported by its consistent revenue growth of 3.33% over the last twelve months and an impressive track record of maintaining dividend payments for 33 consecutive years, currently offering a 3.84% yield.
Equity Residential’s fourth-quarter 2024 blended spreads reached 1.0%, meeting its projections but showing a deceleration from the third quarter of 2024 by 100 basis points. This was in contrast to UDR’s fourth-quarter 2024 figures, which saw a decrease of 0.6% and a sharper deceleration of 240 basis points. Notably, Equity Residential’s renewal rates increased by 5.0%, 40 basis points higher than in the third quarter of 2024, suggesting a robust renter base. The year-over-year turnover decreased by 40 basis points.
Despite seasonal supply pressures impacting new leases, which were down by 4.3%, the company’s occupancy rates remained strong at 96.1%, a 30 basis points improvement from the previous year. Net bad debt for the fourth quarter of 2024 was reported at 1.1%, consistent with the third quarter of 2024 and lower than the 1.3% seen in the fourth quarter of 2023. Goldsmith anticipates some fluctuations but expects a trend toward the historical level of 0.5%.
Looking ahead to the first quarter of 2025, Equity Residential forecasts blended rent growth of 1.4% to 2.2%, slightly below the 1.6% in the first quarter of 2024. If renewals remain flat year-over-year at 4.7%, this would imply a new lease decline of 1.8%. According to InvestingPro’s Fair Value analysis, the stock appears to be trading above its Fair Value. Goldsmith also noted the potential for an improving supply and demand outlook in 2025 and the return to office driving demand for more urban properties, which should support Equity Residential’s valuation. The firm currently trades at a 7% premium relative to Apts, compared to the five-year average of 6%, with a PEG ratio of 0.81 suggesting attractive valuation relative to growth. For comprehensive valuation insights and detailed analysis, investors can access the full Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Equity Residential saw Stifel analysts adjust their price target on the company’s shares from $85.00 to $82.25, maintaining a Buy rating. This followed the company’s fourth-quarter financial performance, which reported a normalized Funds From Operations (FFO) per share of $1.00, slightly lower than Stifel’s prediction by $0.01. The company also adopted a new executive severance plan and expanded its commercial paper note program, according to recent SEC filings.
On another note, CFRA raised Equity Residential’s price target from $81.00 to $84.00, maintaining a Buy rating. This was due to confidence in the improvement of the company’s rental markets in the upcoming year. Meanwhile, Stifel upgraded shares of Equity Residential from Hold to Buy and increased the price target to $81.50 from $77.75, reflecting a positive outlook on the company’s growth potential.
These are among the recent developments for Equity Residential, a significant player in the residential sector. The company’s performance and analysts’ ongoing confidence in its stock continue to be of interest to investors closely monitoring the real estate market.
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