Analyst Note| Kevin Brown |
Invitation Homes reported second-quarter results that were slightly ahead of our expectations, leading us to reaffirm our $34 fair value estimate for the no-moat company. Same-store occupancy held firm at 98.3%, only 10 basis points off the company's all-time high set the prior quarter. Demand has been very strong, allowing the firm to push 13.8% spreads on new leases while also achieving 5.8% spreads on renewal lease, leading to an overall 8.0% lease spread for the company in the second quarter. As a result, the firm reported same-store revenue growth of 5.9%, the highest single quarter in its history. Meanwhile, the excess demand allowed it to cut back on marketing expenses, keeping total expense growth low at just 0.9%, leading to same-store net operating income growth of 8.4% in the second quarter that was slightly ahead of our 6.9% estimate. Strong portfolio growth allowed the company to report core funds from operations of $0.37 in the second quarter, representing 14.4% year-over-year growth and coming in a penny ahead of our estimate.