Key Takeaways: Best Idea Long AMH topped consensus by +$0.03/share (+10%) and Hedgeye by a penny (+1.8%) (see Figure 1 below), and as expected took the same store and Core FFO guidance ranges up essentially to where we were heading into the quarter. We have no idea why the Street was and remains so low, but this one just seemed to have a bright red bullseye painted on the side given the math underlying rental rate growth. But alas, we will take the ball and run with it! All kidding aside, the things that are most important here are (1) market asking rates continue to accelerate driving spreads to new customers into the high-teens in July, and (2) we need to seriously consider that earnings next year could be in the high-$1.50 to low-$1.60 range vs. consensus at $1.44, so STILL ~10% too low. A few key highlights from the quarter:
- Spreads on new customer leases were +13.7% in 2Q21 (basically in-line with INVH) for the fourth straight sequential acceleration, and market asking rates accelerated further in July driving new lease spreads to +16.5%. The models are breaking to the upside
- Same store average occupancy continues to trend in the mid-97% range alongside the pricing increases, indicating plenty of room to push rent in our view
- 256 homes were delivered through the AMH Development Program in the quarter versus our 275 assumption, so essentially in-line and remaining on-pace to hit the target run-rate of 3,000 to 4,000 annual home deliveries by 2023. On the call need to listen to the pace of lot/land inventory additions in building toward potentially ~13k by year end 2021. Both of these metrics are ones to watch in coming quarters
- AMH raised the FY21 Core FFO range by +4% at the midpoint to $1.29 to $1.35 (vs. Hedgeye at $1.34 and Consensus at $1.29 coming into the quarter). Numbers need to come up. We expect SSNOI for FY21 to come in at or above the high end of the +5.25% to +6.75% range
Figure 1: AMH 2Q21 Earnings Variances
Please call or e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
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