NEW YORK ( TheStreet) -- Equity Residential (NYSE: EQR) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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- Despite its growing revenue, the company underperformed as compared with the industry average of 17.3%. Since the same quarter one year prior, revenues rose by 12.0%. 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. 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 ($1.32 versus $0.21).
- Despite the current debt-to-equity ratio of 1.60, it is still below the industry average, suggesting that this level of debt is acceptable within the Real Estate Investment Trusts (REITs) industry.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, EQUITY RESIDENTIAL underperformed against that of the industry average and is significantly less than that of the S&P 500.
- After a year of stock price fluctuations, the net result is that EQR's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
-- Written by a member of TheStreet Ratings Staff