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Equity Residential EQR

Morningstar Rating
$62.73 +1.19 (1.93%)
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Company Report

Following Two Years of Rising Interest Rates, We Believe REITs Are Trading at Significant Discounts

We believe that there are several attractive opportunities across the US REIT sector for investors to consider. Following the recovery of many REIT sector fundamentals from the pandemic by mid-2021, we viewed the REIT sector as fairly valued through early 2022. However, the past two years have seen the rapid rise in interest rates and a slowing economy, which has led to major valuation declines across the sector. Our analysis of the REIT sector over the past 25 years suggests that the relative stock performance of REITs is negatively correlated with interest rate movements. The second and third quarters of 2023 saw large interest rate increases with the 10-year Treasury approaching 5%, which led to the sector underperforming. This occurred even as many REITs reported same-store net operating income, or NOI, growth at historical highs in 2022 due to high inflation. Higher interest rates, lower liquidity, tighter capital market conditions, and decelerating same-store NOI growth all led to a significant correction in the stock price for many REITs.

Price vs Fair Value

EQR is trading within a range we consider fairly valued.
Price
$61.54
Fair Value
$77.00
Uncertainty
Medium
1-Star Price
$255.39
5-Star Price
$64.20
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Equity Residential's portfolio of high quality assets should see relatively consistent levels of demand long term from high-income earners and will likely see just a small hit to fundamentals during the current pandemic as most residents have not experienced job losses.

Bears

The pandemic has made many millennials consider alternatives to urban apartments, including suburban apartments and single-family homeownership. This demographic has put off many major adult milestones but may finally be making the shift toward the suburbs.

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News

Trading Information

Previous Close Price
$61.55
Day Range
$61.8862.85
52-Week Range
$52.5669.42
Bid/Ask
$62.71 / $62.74
Market Cap
$23.78 Bil
Volume/Avg
1.2 Mil / 1.9 Mil

Key Statistics

Price/Earnings (Normalized)
39.21
Price/Sales
8.30
Dividend Yield (Trailing)
4.41%
Dividend Yield (Forward)
4.47%
Total Yield
4.58%

Company Profile

Equity Residential owns a portfolio of 302 apartment communities with around 80,000 units and is developing two additional properties with 537 units. The company focuses on owning large, high-quality properties in the urban and suburban submarkets of Southern California, San Francisco, Washington, D.C., New York, Seattle, and Boston.
Sector
Real Estate
Industry
REIT - Residential
Stock Style Box
Mid Core
Total Number of Employees
2,400

Competitors

Valuation

Metric
EQR
AIRC
AVB
Price/Earnings (Normalized)
39.218.8437.14
Price/Book Value
2.092.372.19
Price/Sales
8.307.039.31
Price/Cash Flow
15.5814.5416.72
Price/Earnings
EQR
AIRC
AVB

Financial Strength

Metric
EQR
AIRC
AVB
Quick Ratio
0.060.460.57
Current Ratio
0.170.530.76
Interest Coverage
4.166.275.56
Quick Ratio
EQR
AIRC
AVB

Profitability

Metric
EQR
AIRC
AVB
Return on Assets (Normalized)
4.44%10.92%4.86%
Return on Equity (Normalized)
8.07%31.64%8.64%
Return on Invested Capital (Normalized)
5.89%13.79%6.08%
Return on Assets
EQR
AIRC
AVB
See how this stock stacks up to its competitors with Morningstar Investor

REIT - Residential Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
AVB
AvalonBay Communities IncQctykvnhsStdfz$25.9 Bil
INVH
Invitation Homes IncGtkjklfYrq$20.5 Bil
ESS
Essex Property Trust IncRthkfzbzDgxm$15.0 Bil
SUI
Sun Communities IncNcgmzxcXrwg$14.7 Bil
MAA
Mid-America Apartment Communities IncGsky$14.5 Bil
AMH
American Homes 4 Rent Class AYwwg$12.8 Bil
UDR
UDR IncMcvc$11.8 Bil
ELS
Equity Lifestyle Properties IncLmpnydplWmk$11.6 Bil
AIRC
Apartment Income REIT Corp Class AFdnxqmttpBhxj$5.6 Bil

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