Investing.com -- S&P Global Ratings has revised the outlook for American Homes 4 Rent (NYSE: AMH ) to positive from stable, citing the company’s solid performance and favorable industry trends. The company has been achieving steady operating performance while expanding its portfolio through acquisitions, developments, and joint ventures. The credit metrics of the company have also improved, with debt to EBITDA falling below 6x on an adjusted basis.

The ratings on the company, including the ’BBB’ issuer credit rating, ’BBB’ issue-level ratings on its unsecured notes, and ’BB+’ issue-level preferred stock ratings, have been affirmed by S&P Global Ratings. The positive outlook reflects the expectation that AMH will continue to benefit from long-term tailwinds in the single-family residential market, including low affordability and undersupply of U.S. housing, and maintain credit protection measures near current levels.

AMH’s operating performance in 2024 was strong, with core net operating income (NOI) from same-home properties increasing by 5.3% year over year. This increase was largely due to a rise in average monthly realized rent per property, higher fees, and less bad debt, despite a slight decrease in average occupied days. In 2025, AMH is expected to see a low to mid-single-digit percentage improvement in same-home property NOI, supported by continued high occupancy and strong rental rate growth.

The company is expected to remain focused on growth through development, with continued operating expense rationalization as it continues to standardize expenses and monetize homes with greater capital expenditure. AMH’s development pipeline contributes purpose-built rentals to the platform, with standardized finishes to minimize maintenance costs over time.

Over the past few years, AMH’s S&P Global Ratings-adjusted EBITDA margin has steadily improved, reaching 54.1% in 2024, up from 49.8% in 2020. The company has also been deleveraging its balance sheet and paying down secured debt. As a result, FCC (BME: FCC ) has improved, reaching 3.7x in 2024, up from 2.8x in 2020. Likewise, debt leverage has steadily declined to 5.5x in 2024 from 6.4x in 2021.

AMH has been a regular issuer in the unsecured bond market, with its latest issue during the fourth quarter of 2024 ($500 million notes due in 2035) at a favorable rate given market conditions (5.25%). The company has just two remaining securitization loans due in 2045 that it intends to repay in 2025 ($925 million with an average interest rate of 4.24%). It is expected to refinance these loans with unsecured debt, making the portfolio 100% unencumbered.

The positive outlook on AMH reflects the expectation that the tailwinds in the single-family residential market will remain solid, supported by the unaffordability and undersupply of U.S. housing. The company is expected to continue to expand prudently, mainly through development and JVs, over the next two years while sustaining credit metrics within its stated financial policies, with debt to EBITDA below 6x.

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