Equity Residential Stock Downgraded (EQR)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

NEW YORK ( TheStreet) -- Equity Residential (NYSE: EQR) has been downgraded by TheStreet Ratings from hold to sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, poor profit margins and generally disappointing historical performance in the stock itself.

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Highlights from the ratings report include:
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, EQUITY RESIDENTIAL's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for EQUITY RESIDENTIAL is rather low; currently it is at 19.20%. It has decreased significantly from the same period last year. Despite the weak results of the gross profit margin, the net profit margin of 59.98% has significantly outperformed against the industry average.
  • The share price of EQUITY RESIDENTIAL has not done very well: it is down 9.51% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • EQUITY RESIDENTIAL has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past two years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, EQUITY RESIDENTIAL increased its bottom line by earning $0.57 versus $0.15 in the prior year.
  • 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 66.8% when compared to the same quarter one year prior, rising from $226.14 million to $377.19 million.

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 397.7, above the S&P 500 P/E ratio of 17.7. Equity has a market cap of $18.63 billion and is part of the financial sector and real estate industry. Shares are down 8.8% year to date as of the close of trading on Tuesday.

You can view the full Equity Ratings Report or get investment ideas from our investment research center.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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