Equity Residential Stock Hold Recommendation Reiterated (EQR)

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 reiterated by TheStreet Ratings as a hold with a ratings score of C+. 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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Highlights from the ratings report include:
  • 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 16.4%. 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 12.4% in earnings ($0.81 versus $0.92).
  • EQR has underperformed the S&P 500 Index, declining 6.06% from its price level of one year ago. 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.

Equity Residential, a real estate investment trust (REIT), engages in the acquisition, development, and management of multifamily properties in the United States. Equity has a market cap of $20.9 billion and is part of the financial sector and real estate industry. The company has a P/E ratio of 63.00, above the S&P 500 P/E ratio of 18.00. Shares are up 1.6% 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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