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What to Expect From AvalonBay (AVB) This Earnings Season?
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AvalonBay Communities, Inc. (AVB - Free Report) is slated to report fourth-quarter and full-year 2020 results on Feb 3, after the market closes.The company’s results will likely reflect year-over-year declines in revenues and funds from operations (FFO) per share.
In the last reported quarter, this residential real estate investment trust (REIT) reported a negative surprise of 4.63% in terms of FFO per share. Results reflected decline in residential rental revenues due to concessions, occupancy woes and uncollectible lease revenues.
Over the last four quarters, the company surpassed estimates on one occasion and missed in the other three, the average negative surprise being 1.17%. The graph below depicts the surprise history of the company:
AvalonBay Communities, Inc. Price and EPS Surprise
Let’s see how things have shaped up for this announcement.
Factors to Consider
The U.S. apartment market witnessed solid leasing activity in the fourth quarter of 2020, per a report from the real estate technology and analytics firm RealPage . Typically, demand remains low during the October-December quarter, but thanks to the coronavirus pandemic that pushed this demand to the latter half of the year from the usually strong second quarter. Particularly, in the last three months of 2020, absorptions amounted to about 79,000 units.
However, this demand rebound has not been even, rather, it has been varied across markets. Demand in the Sun Belt markets and the sub-urban ones remained strong, while considerable move-outs and sluggish demand were noticed in gateway markets.
Though occupancy level held up well in December, rent changes varied across metros, with select big cities witnessing significant price reductions, while in a number of individual metros rents continue to rise or have been steady, per a report from RealPage. Particularly, in the country’s 150 largest metros December occupancy came in at 95.5%, which is just a tad below the year-earlier figure of 95.6%. Effective asking rents, on a nationwide basis, as of December were off 1% from the 2019-end tally, with the December price point coming at $1,410 per month.
Considering AvalonBay, we note that this residential REIT has high-quality assets located in some of the premium markets of the country, and is banking on technology, scale and organizational capabilities to drive innovation and margin expansion in its portfolio.The company is also likely to retain its balance-sheet strength.
However, the company has significant exposure to urban residential assets and this portfolio has been feeling the brunt. A number of factors are affecting rental demand, including health concerns of living in dense environments and work-from-home flexibility, that is resulting in a shift of renter demand away from higher cost and urban/infill markets.
In addition, record-low mortgage rates are spurring demand for existing and new-home purchases, mainly for young age cohorts, where homeownership rates have started to shoot up. During the quarter under discussion, same-store revenues might have been strained amid pressure on rental rates. Furthermore, use of concessions has been rampant in urban portfolios, which is likely to have dented the company’s performance during the quarter under review.
The coronavirus mayhem is also affecting the rent-paying capabilities of residential tenants. According to a RealPage report, rent collections have been disappointing in the lower-tier properties. Also, rent collections are trailing in expensive metros, where financial assistance is insufficient to cover most part of the rent bill. This might have hurt AvalonBay’s performance as well. Nevertheless, the company’s portfolio is well diversified and this has been the saving grace for the company during the pandemic as though its urban portfolio is feeling the brunt, the sub-urban portfolio is performing better.
Amid these, the Zacks Consensus Estimate of $556.6 million for fourth-quarter revenues suggests a 6.2% year-over-year decrease. Established community-economic occupancy is projected at 93% for the quarter, while average rental rates are estimated to be $2,620.
Prior to the quarterly earnings release, analysts seem to have become slightly pessimistic about the company’s prospects as the Zacks Consensus Estimate for the October-December quarter FFO per share moved a cent south to $2.09 over the past week. It also suggests a year-over year decline of 14%.
For the full year, the Zacks Consensus Estimate for FFO per share has been revised marginally south over the past month to $8.76. The figure also indicates a 6.2% decrease year over year on revenues of $2.3 billion.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for AvalonBay this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
AvalonBay currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -0.36%.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Healthpeak Properties, Inc. , scheduled to report earnings figures on Feb 9, has an Earnings ESP of +4.40% and holds a Zacks Rank of 3 at present.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Image: Bigstock
What to Expect From AvalonBay (AVB) This Earnings Season?
AvalonBay Communities, Inc. (AVB - Free Report) is slated to report fourth-quarter and full-year 2020 results on Feb 3, after the market closes.The company’s results will likely reflect year-over-year declines in revenues and funds from operations (FFO) per share.
In the last reported quarter, this residential real estate investment trust (REIT) reported a negative surprise of 4.63% in terms of FFO per share. Results reflected decline in residential rental revenues due to concessions, occupancy woes and uncollectible lease revenues.
Over the last four quarters, the company surpassed estimates on one occasion and missed in the other three, the average negative surprise being 1.17%. The graph below depicts the surprise history of the company:
AvalonBay Communities, Inc. Price and EPS Surprise
AvalonBay Communities, Inc. price-eps-surprise | AvalonBay Communities, Inc. Quote
Let’s see how things have shaped up for this announcement.
Factors to Consider
The U.S. apartment market witnessed solid leasing activity in the fourth quarter of 2020, per a report from the real estate technology and analytics firm RealPage . Typically, demand remains low during the October-December quarter, but thanks to the coronavirus pandemic that pushed this demand to the latter half of the year from the usually strong second quarter. Particularly, in the last three months of 2020, absorptions amounted to about 79,000 units.
However, this demand rebound has not been even, rather, it has been varied across markets. Demand in the Sun Belt markets and the sub-urban ones remained strong, while considerable move-outs and sluggish demand were noticed in gateway markets.
Though occupancy level held up well in December, rent changes varied across metros, with select big cities witnessing significant price reductions, while in a number of individual metros rents continue to rise or have been steady, per a report from RealPage. Particularly, in the country’s 150 largest metros December occupancy came in at 95.5%, which is just a tad below the year-earlier figure of 95.6%. Effective asking rents, on a nationwide basis, as of December were off 1% from the 2019-end tally, with the December price point coming at $1,410 per month.
Considering AvalonBay, we note that this residential REIT has high-quality assets located in some of the premium markets of the country, and is banking on technology, scale and organizational capabilities to drive innovation and margin expansion in its portfolio.The company is also likely to retain its balance-sheet strength.
However, the company has significant exposure to urban residential assets and this portfolio has been feeling the brunt. A number of factors are affecting rental demand, including health concerns of living in dense environments and work-from-home flexibility, that is resulting in a shift of renter demand away from higher cost and urban/infill markets.
In addition, record-low mortgage rates are spurring demand for existing and new-home purchases, mainly for young age cohorts, where homeownership rates have started to shoot up. During the quarter under discussion, same-store revenues might have been strained amid pressure on rental rates. Furthermore, use of concessions has been rampant in urban portfolios, which is likely to have dented the company’s performance during the quarter under review.
The coronavirus mayhem is also affecting the rent-paying capabilities of residential tenants. According to a RealPage report, rent collections have been disappointing in the lower-tier properties. Also, rent collections are trailing in expensive metros, where financial assistance is insufficient to cover most part of the rent bill. This might have hurt AvalonBay’s performance as well. Nevertheless, the company’s portfolio is well diversified and this has been the saving grace for the company during the pandemic as though its urban portfolio is feeling the brunt, the sub-urban portfolio is performing better.
Amid these, the Zacks Consensus Estimate of $556.6 million for fourth-quarter revenues suggests a 6.2% year-over-year decrease. Established community-economic occupancy is projected at 93% for the quarter, while average rental rates are estimated to be $2,620.
Prior to the quarterly earnings release, analysts seem to have become slightly pessimistic about the company’s prospects as the Zacks Consensus Estimate for the October-December quarter FFO per share moved a cent south to $2.09 over the past week. It also suggests a year-over year decline of 14%.
For the full year, the Zacks Consensus Estimate for FFO per share has been revised marginally south over the past month to $8.76. The figure also indicates a 6.2% decrease year over year on revenues of $2.3 billion.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for AvalonBay this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
AvalonBay currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -0.36%.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Rexford Industrial Realty, Inc. (REXR - Free Report) , slated to release fourth-quarter earnings on Feb 10, has an Earnings ESP of +2.13% and carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Healthpeak Properties, Inc. , scheduled to report earnings figures on Feb 9, has an Earnings ESP of +4.40% and holds a Zacks Rank of 3 at present.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>