Ahead Of The Bell: Equity Residential Upgraded

NEW YORK (AP) — Fox-Pitt Kelton boosted its rating on Equity Residential to "Outperform" from "In Line" Wednesday, saying the apartment building real estate investment trust's current stock price doesn't reflect the better-than-average quality of its property portfolio and balance sheet.

Equity Residential has improved its properties in the past few years by selling older assets and buying into better-located developments on the coast, according to analyst Robert Stevenson. The company's average rental rate of $1,342 is now 13 percent better than its competitors' average rate, he said. The company also has sufficient liquidity to meet debt obligations through 2011.

Given those positives, Stevenson thinks Equity Residential's stock will stand out from other REITs. He said the sector is due for a pullback, with shares having doubled as a group since early March. When that happens, Equity Residential should do better in the stock market than its rivals, he said.

He raised his target price on the stock by $5 to $30. That implies a gain of nearly 15 percent from Tuesday's closing price.

Stevenson cautioned that problems with the company's development pipeline could weigh on the stock, and that the REIT is heavily exposed to some of the most challenging housing markets in the U.S., including South Florida, Los Angeles and Phoenix.