American Homes 4 Rent: Still Too Expensive 4 Us

Core Viewpoint - American Homes 4 Rent (AMH) reported Q4 earnings that exceeded consensus estimates, but the company is still viewed as having a stretched valuation, leading to an upgrade to a bearish Hold rating from a Sell [2][11] Earnings Update - AMH's wholly-owned portfolio grew by approximately 0.4% quarter-over-quarter (QoQ), while the joint venture (JV) portfolio increased by about 1.4% [3] - Average monthly rents rose by approximately 1.2% QoQ, although occupancy slightly decreased [3] - Core revenues increased in line with average monthly rents, growing around 1.2% QoQ, while Same-Home (SH) core revenue remained virtually flat QoQ [4][5] Operational KPIs - Total homes owned and managed increased to 62,310, reflecting a 0.5% growth QoQ and a 1.3% increase year-over-year (YoY) [4] - The occupancy rate was reported at 95.0%, down from 95.8% YoY [4] - The average blended change in rent decreased to 5.7% from 8.0% YoY [4] Financial Performance - Funds from Operations (FFO), Core FFO, and Adjusted Funds from Operations (AFFO) per share improved significantly, with growth rates of approximately 5%, 4%, and 10% respectively [5] - The dividend was increased by about 18% to approximately $1.04 per annum, indicating a payout ratio of around 67% on Q4 AFFO [5] Guidance and Valuation - Guidance for 2024 indicates Core FFO per share between $1.70 and $1.76, aligning with previous sell-side forecasts [7] - The company trades at 21.3x 2024E Core FFO per share and 25.0x LTM AFFO, with a yield of approximately 2.8% following the dividend hike [8] - AMH's valuation is approximately 33% above its Net Asset Value (NAV) estimate, which is based on a 6% cap rate [9] Market Position and Strategy - AMH issued around 2.8 million shares in Q4 through its ATM program, capitalizing on its premium valuation [10] - The company is set to join the S&P 400 MidCap Index, which is expected to drive increased technical buying [10] - AMH's issuance of $600 million in "green bonds" at 5.5% is anticipated to lower its cost of debt, supporting its growth funding [10]