Earnings call transcript: NexPoint Residential Trust cuts outlook in Q3 2026

NexPoint Residential Trust reported third-quarter 2026 earnings that topped expectations on a per-share basis but fell short on revenue and came with a sharply lower outlook for the rest of the year. The apartment owner posted adjusted earnings of $0.4578 a share, compared with a forecast for a loss of $0.4025 a share, while revenue came in at $64.5 million versus expectations of $64.87 million. Shares fell 7.15% to $16.75 in premarket trading, after closing at $18.04, leaving the stock near the bottom of its 52-week range.

NexPoint Residential Trust said third-quarter Core FFO was $0.52 a diluted share, down from $0.70 a share a year earlier. Revenue rose modestly to $64.5 million from $62.8 million in the same period last year, helped in part by the Sedona property contribution. But same-store performance weakened, with revenue down 70 basis points, expenses up 11.2% and same-store NOI down 8.2% year over year.

The company’s portfolio, which consists of 36 properties and about 10,000 units, remains concentrated in Sunbelt markets such as Atlanta, Raleigh, Phoenix, Nashville, South Florida and Las Vegas. Management said the long-term supply picture is improving, but the quarter reflected continued pressure from elevated concessions, softer new lease pricing and lower occupancy.

Occupancy ended the quarter at 92.9%, down 70 basis points from the prior quarter. Average effective rent fell 0.7% year over year to $1,487, while new lease pricing turned more negative through the quarter, reaching minus 6% in September before improving somewhat in October.

The company’s reported EPS of $0.4578 beat the consensus forecast of a $0.4025 loss by $0.8603 a share, a large upside surprise on the headline number. Revenue of $64.5 million missed the $64.87 million estimate by about $0.37 million, or 0.57%.

On the surface, the EPS result was strong. But the quarter’s operating trends were softer than the headline beat suggests. Core FFO declined 25.7% from a year earlier, same-store NOI fell 8.2%, and management reduced full-year guidance. That combination suggests the market is likely to view the beat as less important than the weakening underlying business trend.

The stock fell 7.15% to $16.75 from the previous close of $18.04, a loss of $1.29 a share. The decline pushed the shares close to the 52-week low of $16.23 and far below the 52-week high of $32.36.

Investors appeared to focus on the lower guidance, pressure on occupancy and rent growth, and the company’s sensitivity to interest rates. The move also suggests that the EPS beat was not enough to offset concerns about margins, leverage and the dividend outlook. No unusual trading volume data was provided.

NexPoint cut its full-year Core FFO guidance to a range of $2.17 to $2.27 a share, with a midpoint of $2.22, down from $2.45 previously. Same-store NOI guidance was reduced to a range of negative 5.1% to negative 3.6%, with a midpoint of negative 4.3%, compared with a prior midpoint of negative 1%.

The company said fourth-quarter average financial occupancy is expected to be 92.8%, with concessions at 1.9% of gross potential rent. Management also said the dividend will be covered on an annualized basis, but not on a fourth-quarter spot basis. The board is expected to revisit the dividend in early 2027. Despite the near-term coverage concerns, the stock currently offers a dividend yield of 11.75%, and InvestingPro notes the company pays a significant dividend to shareholders. For investors seeking deeper analysis, NexPoint is among the 1,400+ US equities covered by comprehensive Pro Research Reports, which transform complex financial data into clear, actionable intelligence.

Looking ahead, management said it expects incremental revenue growth in 2027, not a sharp rebound. It pointed to improving supply-demand conditions, with deliveries in its submarkets down 42% from the 2024 peak and new starts down 54% from last year’s pace. The company also said 2028 is likely to be the lightest delivery year of the cycle.

Capital allocation priorities remain focused on debt reduction first, then share repurchases funded by asset sales, and selective acquisitions. The board recently authorized up to $150 million of buybacks over two years.

“Q3 came in below expectations. Core FFO was $0.52 a share, $0.07 below consensus. We’re lowering our full year Core FFO midpoint to $2.22 from $2.45, and our same store NOI midpoint to -4.3% and -1%,” said Paul Richards, executive vice president and chief financial officer.

Matt McGraner, executive vice president and chief investment officer, said the company is taking a patient approach to capital allocation: “We’re not panicking. We are not going to chase occupancy at any price, sell assets and do a weak bid, or make a decision we would regret when this cycle inevitably turns.”

McGraner also highlighted the company’s valuation gap, saying: “Our NAV midpoint, $38.33 a share, and the stock trades around 18 bucks. We believe our largest asset, Avant at Pembroke Pines, alone is worth $8-$9 per share, about half of our market cap today.”

Analysts pressed management on several topics, including the confidence behind a 2027 recovery, the impact of the fiber rollout, and the timing of any dividend reset. Management said it expects supply pressures to ease next year and pointed to a favorable backdrop in Sunbelt markets.

Questions also focused on the company’s leverage and interest-rate exposure. Management said it had planned to hedge more of the portfolio earlier in 2026 but did not chase higher swap rates. It said it is now relying on a mix of asset sales, dividend flexibility and operating cash flow.

Analysts asked about occupancy trends and whether revenue could recover sharply in 2027. Management said it does not expect a sharp rebound, but does expect incremental improvement as supply normalizes and lease-up pressure eases.

Another area of interest was the company’s capital allocation plan. Management said it will sell assets one or two at a time when pricing is attractive, use proceeds to reduce debt, and then consider buybacks. It also said it is not considering a portfolio-level monetization until new lease growth turns positive for a sustained period.

Moderator: Hello, everyone. Thank you for joining us, and welcome to the NexPoint Residential Trust Third Quarter 2026 Earnings Call. I will now hand the conference over to Carley Musser with Communications and Corporate Affairs. Carly, please go ahead.

Carley Musser, Director of Communications and Corporate Affairs, NexPoint Residential Trust: Thank you, Al. Good morning, everyone, and welcome to NexPoint Residential Trust Conference Call to review the company’s results for the third quarter ended September 30, 2026. On the call today are Paul Richards, Executive Vice President and Chief Financial Officer, Matt McGraner, Executive Vice President and Chief Investment Officer, and Bonner McDermett, Vice President, Asset and Investment Management. As a reminder, this call is being webcast through the company’s website at nxrt.nexpoint.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management’s current expectations, assumptions, and beliefs.

Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company’s most recent annual report on Form 10-K and the company’s other filings with the SEC for more complete discussion of risks and other factors that could affect any forward-looking statements. The statements made during this conference call speak only of today’s date, and except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company’s earnings release that was filed earlier today. I would now like to turn the call over to Paul Richards. Please go ahead, Paul.

Paul Richards, Executive Vice President and Chief Financial Officer, NexPoint Residential Trust: Thank you, Carly, and good morning, everyone. I’ll walk through our third quarter and year-to-date same store results, expenses, interest, and the Tell Crossing acquisition, the balance sheet, NAV, the dividend, and changes to our full year outlook, including how we think about 2027. Then Matt will cover operation and market fundamentals looking forward. I’ll start with the headline. Q3 came in below expectations. Core FFO was $0.52 a share, $0.07 below consensus. We’re lowering our full year Core FFO midpoint to $2.22 from $2.45, and our same store NOI midpoint to -4.3% and -1%. Third quarter Core FFO was $13.4 million, or $0.52 per diluted share, compared to $0.70 a year ago. FFO was $11.7 million, or $0.46 a share, and AFFO was $16.2 million, or $0.63.

Net loss was $11.5 million, or $0.45 per diluted share, including $23.2 million of depreciation and amortization. That compares to a net loss of $7.8 million, or $0.31 a share a year ago. Total revenue was $64.5 million, up from $62.8 million, with Sedona in the numbers. Total NOI was $36.6 million across our 36 properties. On a same store basis, 35 properties and about 98% of our units, revenue was down 70 basis points. Expenses are up 11.2%, and NOI was down 8.2% to $35.6 million. Occupancy ended the quarter at 92.9%, down 70 basis points, and average effective rent was $1,487, down 0.7%. Year to date, Core FFO is $1.87 a share against $2.14 last year. Expenses drove most of the quarter’s NOI decline, about $2.7 million of the $3.2 million. Three specific items explain the decrease.

First, Nashville real estate taxes. Last year’s third quarter carried a one-time real estate tax refund at Residences at Glenview Reserve, which equates to