Morningstar | INVH Updated Forecasts and Estimates from 15 May 2019
Invitation Homes' first-quarter results were slightly ahead of our expectations, though we don't see anything from the quarter to cause a material change to our $26.50 fair value estimate for the no-moat company. Same-store occupancy was higher than we anticipated with an 80-basis-point increase to 96.5% compared with our estimate of a 40-basis-point increase. Same-store rent growth was in line with our expectations at 4.1% for the quarter, so revenue growth was slightly ahead of expectations at 4.7% compared with our 4.2% estimate. Invitation Homes did a great job controlling same-store core operating expenses with a 10-basis-point drop in the first quarter compared with our estimate of 3.9% growth. As a result, same-store net operating income outperformed our expectations with 7.3% growth compared with our 4.3% growth assumption. Core funds from operations beat our expectations by a penny due to the lower operating expenses, coming in at $0.33 per share.Management slightly increased its guidance for 2019 to reflect the good quarter. While it maintained its same-store revenue growth forecast at 3.8%-4.4% as it faces tougher occupancy comps through the rest of 2019, it did reduce its same-store expense growth by 50 basis points to a new range of 3.0%-4.0% to reflect better-than-anticipated first-quarter results. As a result, management increased its same-store NOI growth by 50 basis points to a new range of 4.0%-5.0% for 2019. After incorporating the first-quarter results into our estimates, our assumptions of 3.9% revenue growth, 3.1% expense growth, and 4.4% NOI growth are within the updated guidance ranges. 2019 core FFO growth was also increased by a penny to a new range of $1.21-$1.29, with our estimate of $1.25 at the updated midpoint. The first-quarter beat driven by expense savings was impressive, but our takeaway from this quarter is that we have greater confidence in our estimates for the rest of year.
Invitation Homes is an owner and operator of single-family homes for lease, providing residents homes in neighborhoods across America. The company operates primarily in the Western United States, Florida, and the Southeast United States. The company has one reportable segment related to acquiring, renovating, leasing, and operating single-family homes as rental properties.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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