UDR Inc. UDR, a premier multifamily real estate investment trust (REIT), is set to announce its fourth-quarter and full-year 2024 results after the closing bell on Feb. 5. While its quarterly results are likely to reflect growth in revenues, funds from operations (FFO) per share might remain unchanged.

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In the last reported quarter, this Denver, CO-based residential REIT came up with an FFO as adjusted per share of 62 cents, in line with the Zacks Consensus Estimate. Quarterly results reflected an increase in revenues from same-store communities, prior-year acquisitions and completed developments.

In the last four quarters, UDR’s FFO as adjusted per share met the Zacks Consensus Estimate on three occasions and surpassed on the other, the average surprise being 0.41%. The graph below depicts the surprise history of the company:

United Dominion Realty Trust, Inc. Price and EPS Surprise

United Dominion Realty Trust, Inc. price-eps-surprise | United Dominion Realty Trust, Inc. Quote

Let’s see how things have shaped up before this announcement.

US Apartment Market in Q4

Per RealPage data, the U.S. apartment demand surged to its highest level in almost three years in the fourth quarter of 2024, comfortably surpassing the record-high new supply seen that year.

Between October and December 2024, the U.S. apartment market absorbed 230,819 market-rate units, while 155,408 new units were delivered during the same period. Annual supply hit 588,883 units, while demand led to 666,699 units.

As demand exceeded supply, U.S. apartment occupancy saw a notable annual increase, reaching 94.8% in December. The annual occupancy change was 0.7%. However, rent growth remained stagnant due to the pressure of historically high new supply levels. Rents rose 0.5% in 2024, and the monthly effective rent change was down 0.3%. The average effective rent was $1,823.

UDR: Factors to Consider

UDR owns a geographically diverse mix of A/B quality properties spanning urban and suburban markets across major U.S. regions, including coastal and Sunbelt areas. Through its Next Generation Operating Platform, the company continues to invest in technology and process efficiencies aimed at optimizing cost management and expanding margins by improving digital interactions and resident services. Its strong balance sheet is likely to have facilitated growth initiatives.

Nonetheless, a growing supply of rental units in certain markets has intensified competition, putting pressure on rent growth and affecting quarterly performance. Higher interest expenses may have further impacted the results.

Preliminary Results of UDR

Early in January, UDR provided its preliminary financial results, operating results and investment activity for the fourth quarter of 2024. The company also provided an update on its investment activities.

UDR expects FFO as adjusted per share to be 63 cents for the fourth quarter of 2024 and $2.48 for 2024. Both of these are the midpoints for the guidance range previously provided in the third-quarter 2024 earnings release.

Same-store revenue year-over-year growth is expected to be 2.5% and 2.3% for the fourth quarter and full-year 2024, respectively. Same-store expenses are expected to increase 3.4% and 4.3% for the fourth quarter and full-year 2024, respectively. Same-store net operating income is likely to be 2.1% and 1.5% for the fourth quarter and full-year 2024, respectively. Full-year 2024 growth expectation for all three metrics is better than the midpoints of the previously provided guidance.

Preliminary same-store weighted average physical occupancy for the fourth quarter of 2024 improved to 96.8% from 96.3% in the third quarter. However, the effective blended lease rate for the fourth quarter shows a decline of 0.6% against the 1.8% growth reported in the prior quarter.

UDR also noted that during the fourth quarter, it entered into agreements to sell Leonard Pointe, a 188-home apartment community in New York, for gross proceeds of $127.5 million, and One William, a 185-home apartment community in New Jersey, for $84.0 million. Subject to due diligence and standard closing conditions, the transactions are expected to conclude in the first quarter of 2025.

Projections for UDR

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $420.52 million. This indicates a 2.34% year-over-year rise. 

Before the fourth-quarter earnings release, the company’s activities were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO as adjusted per share has moved up a cent to 63 cents in the past two months. This suggests no change year over year.

For the full year, the Zacks Consensus Estimate for FFO per share is pegged at $2.48 per share. However, the figure indicates a 0.4% increase year over year on revenues of $1.67 billion.

Here is What Our Quantitative Model Predicts for UDR:

Our proven model does not conclusively predict a surprise in terms of FFO per share for UDR this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here. 

UDR currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of +0.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are two stocks from the broader REIT sector — Ventas, Inc. VTR and $Vornado Realty Trust(VNO-N)$ VNO — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.

Ventas, scheduled to report quarterly numbers on Feb. 12, has an Earnings ESP of +0.89% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vornado is slated to report quarterly numbers on Feb. 10. VNO has an Earnings ESP of +2.25% and carries a Zacks Rank of 3 at present.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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