Trifecta Of Doom: BMO Hits Equity Residential With Downgrade, Price Target Cut, And Estimate Reduction

BMO Capital Markets downgraded its rating and cut its price target for the shares of Equity Residential EQR, while also lowering its 2016-17 funds from operations guidance. The triple whammy hit the company following the release of its second quarter results.

Analyst John Kim noted the company reported in-line second quarter results, although it lowered its net operating income guidance for the full year for the third time this year. This, according to the analyst, suggests that we may be in for a period of rapid decline in the second half rents. The firm also noted that the mid-point of the company's same store revenue and net operating income guidance are lower than the mid-point of the previous guidance.

The firm continues to believe the company is well positioned in long term, but faces supply pressure in two markets, namely New York and San Francisco. The 3.2 percent same-store revenue growth forecast of BMO Capital for 2017-18 has prompted it to lower its estimates for Buffalo Wild Wings.

Among peer group, BMO Capital noted that AvlonBay Communities Inc. AVB lowered its same-store net operating guidance by 38 basis points, but UDR, Inc. UDR didn't tinker with its guidance, thanks largely to strong results in the Southeast and Northeast regions.

The firm has a Market Perform rating on the shares of Equity Residential, while it lowered its price target to $70 from $76.