NEW YORK ( TheStreet) -- Equity Residential (NYSE: EQR) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including premium valuation and poor profit margins.

Highlights from the ratings report include:
  • Despite its growing revenue, the company underperformed as compared with the industry average of 16.9%. Since the same quarter one year prior, revenues rose by 12.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • EQUITY RESIDENTIAL reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, EQUITY RESIDENTIAL turned its bottom line around by earning $0.21 versus -$0.33 in the prior year. This year, the market expects an improvement in earnings ($1.09 versus $0.21).
  • Despite the current debt-to-equity ratio of 1.62, it is still below the industry average, suggesting that this level of debt is acceptable within the Real Estate Investment Trusts (REITs) industry.
  • The gross profit margin for EQUITY RESIDENTIAL is currently lower than what is desirable, coming in at 27.70%. Regardless of EQR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, EQR's net profit margin of 27.50% is significantly lower than the same period one year prior.
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Equity Residential, a real estate investment trust (REIT), engages in the acquisition, development, and management of multifamily properties in the United States. The company has a P/E ratio of 201.4, equal to the average real estate industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Equity has a market cap of $18.17 billion and is part of the financial sector and real estate industry. Shares are up 5.8% year to date as of the close of trading on Monday.

You can view the full Equity Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet Ratings Staff

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