Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. 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 increase in net income, revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and weak operating cash flow.
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- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 258.1% when compared to the same quarter one year prior, rising from $102.48 million to $367.02 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 16.3%. Since the same quarter one year prior, revenues rose by 11.1%. Growth in the company's revenue appears to have helped boost 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. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, EQUITY RESIDENTIAL increased its bottom line by earning $0.92 versus $0.15 in the prior year. For the next year, the market is expecting a contraction of 8.7% in earnings ($0.84 versus $0.92).
- In its most recent trading session, EQR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- Net operating cash flow has declined marginally to $183.25 million or 0.56% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
-- Written by a member of TheStreet Ratings Staff