Earnings Scorecard: Aimco

| About: Apartment Investment (AIV)

Apartment Investment and Management Company (NYSE:AIV), or Aimco as the real estate investment trust (REIT) is popularly known, reported fiscal 2010 recurring fourth quarter funds from operations (FFO) of 39 cents per share, which beat the Zacks Consensus Estimate by 4 cents.

Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

We cover below the results of the recent earnings announcement, as well as the subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.

Earnings Report Review

During the quarter, total revenues stood at $293.5 million, compared to $286.7 million in the year-ago period. Total revenues for the reported quarter surpassed the Zacks Consensus Estimate of $277 million.

For full year 2010, Aimco reported FFO of $160.9 million or $1.38 per share compared to $126.0 million or $1.09 in the previous year. Excluding the non-recurring one-time items, FFO during the reported fiscal was $176.7 million or $1.51 per share compared to $178.8 million or $1.55 in 2009. The recurring FFO for fiscal 2010 was well ahead of the Zacks Consensus Estimate of $1.41.

For full year 2010, total revenues stood at $1.1 billion, unchanged from that recorded in 2009. Total revenues for the reported fiscal were in line with the Zacks Consensus Estimate.

Earnings Estimate Revisions- Overview

Fiscal earnings estimates have remained static for Aimco since the earnings release, meaning that analysts are cautious about the long-term performance of the company. Let’s dig into the earnings estimate details.

Agreement of Estimate Revisions

In the last 7 days, both fiscal 2011 and fiscal 2012 earnings estimates were kept unchanged by all the 13 analysts covering the stock, indicating no directional movement for the fiscal year earnings. This signifies that the analysts hold a circumspect outlook regarding the long-term earnings of the company.

Magnitude of Estimate Revisions

Earnings estimates for fiscal 2011 have remained stagnant in the last 7 days at $1.54. For full-year 2011, Aimco expects recurring FFO in the range of $1.46 to $1.56 per share. For fiscal 2012, earnings estimates have remained stable at $1.72 during the same time period.

Management expects a steady improvement in the overall results of the company through stringent cost-control initiatives and revenue maximization efforts by maintaining high occupancy and rental rates.

Moving Forward

The long-term earnings estimate picture for Aimco is neutral. Aimco is one of the largest owners and operators of multifamily apartments in the U.S., with a diversified portfolio of conventional, affordable and student housing communities.

The company has a strong portfolio of Class ‘B’ and Class ‘C’ properties primarily catering to the middle-income market. In addition, Aimco rents and leases its apartment units to a diverse base of residents. This provides a strong upside potential for the company.

However, despite attempts to reposition its portfolio in higher growth markets, much of the company’s portfolio still resides in areas where housing is relatively cheap. As the company continues to sell non-core assets and buy in high-growth infill areas, we expect continued earnings dilution.

We maintain our ‘Neutral’ rating on Aimco, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating, indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Equity Residential (NYSE:EQR), one of the competitors of Aimco.