"The basis of this upward revision is mainly due to a series of one-time items recognized in the third quarter," according to Pike's report. "In addition, ancillary income remains variable; therefore we remain conservative in these assumptions leaving room for potential upside."
Pike points out that while occupancy was flat year over year, a sequential improvement of 500 basis points to 92.9% "deserves recognition." On the other hand, now the real work begins. "We are concerned the upside associated with easy comps and the realization of a more normalized operating environment may limit further fundamental improvement, especially during the seasonally weaker fourth quarter and first quarter periods," according to Pike.
And although Aimco posted a $0.08 "surprise" to Pike's third-quarter estimate, "we believe by removing one-time items, third-quarter results met AIV's expectations due to lower than anticipated interest rates and variable ancillary income, not necessarily improving fundamentals."
Pike is maintaining his $31 price target for Aimco. "While we reduced our discount rate by 20 basis points per share to 6.5%, we also reduced our dividend growth forecast to 3%," according to his report. "We still remain concerned regarding leverage and dividend payout."
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