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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 first-quarter 2020 results on May 6, after the market closes. The company’s quarterly performance is likely to reflect growth in revenues as well as funds from operations (FFO) per share.
In the last reported quarter, this residential REIT surpassed estimate with respect to the FFO per share, recording a positive surprise of 1.25%. Results reflected increase in average rental rates and economic occupancy.
Over the last four quarters, the company surpassed estimates on two occasions for as many misses, the average negative surprise being 0.01%. 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
Though the coronavirus pandemic jeopardized the second half of the March-end quarter, the period had commenced on a positive note with a resilient economy and decent job-market strength. Therefore, the pandemic’s impact is likely to be more pronounced on real estate fundamentals in the second quarter than in the first.
Usually, demand for apartments slows down during the colder months as renters usually prefer less to move in winters. However, per a report from real estate technology and analytics firm RealPage, the U.S. apartment rental market’s performance in February was steady with national apartment occupancy in the month remaining at 95.5%, in line with January’s and up 30 basis points (bps) from the year-ago tally. Rent growth of 2.9% was also in line with the three-year average.
Amid this, AvalonBay is expected to have registered steady rental revenues, given its ownership of high-quality assets located in some of the premium markets of the country. Further, high home-ownership costs in several markets are affecting transitions from renters to homeowners. This, along with favorable demographics and household formation as well as job-market gains, is likely to have boosted occupancy at the company’s residential properties.
AvalonBay has withdrawn its full-year 2020 guidance in light of the coronavirus pandemic. Nevertheless, the company noted that for the two-month period ended Feb 29, 2020, total rental revenues from established communities grew 3.2% year over year. Blended like-term effective rent change for established communities over the two-month period was 1.6% compared with the 2.6% recorded during the same period last year.
Moreover, for the week ended Mar 22, 2020, the company had a physical occupancy rate of 96.1% for established communities compared with the 95.8% recorded during the same week of March 2019. Also, through the week ending Mar 22, blended like-term effective rent change for established communities for March 2020 was 2.3%, versus 2.9% for March 2019.
The Zacks Consensus Estimate of $601.3 million for first-quarter revenues suggests a 30.6% year-over-year increase. Further, the Zacks Consensus Estimate for the quarterly FFO per share is currently pinned at $2.40, indicating 4.4% year-on-year growth. The company is also expected to retain its balance-sheet strength.
AvalonBay has also been pursuing various initiatives to boost efficiency and margin expansion in its portfolio. It has deployed various technology-enabled productivity enhancements like developing online tour scheduling, as well as launching an AI and new maintenance platform. These efforts are likely to have provided the company a competitive edge over others.
However, the company’s activities during the quarter were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate was revised marginally downward over the past 30 days.
Notably, new apartment deliveries are anticipated to have remained elevated in a number of the company’s markets during the January-March quarter. This high supply is likely to strain rental rates. This apart, high concession activity is a concern.
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 carries a Zacks Rank of 3 and its Earnings ESP is -0.61%.
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:
Extra Space Storage Inc. (EXR - Free Report) , slated to release first-quarter earnings on May 6, has an Earnings ESP of +0.12% and carries a Zacks Rank of 3 at present.
Americold Realty Trust (COLD - Free Report) , expected to release earnings results around May 7, has an Earnings ESP of +9.74% and currently holds a Zacks Rank #3.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
What to Expect From AvalonBay (AVB) This Earnings Season?
AvalonBay Communities, Inc. (AVB - Free Report) is slated to report first-quarter 2020 results on May 6, after the market closes. The company’s quarterly performance is likely to reflect growth in revenues as well as funds from operations (FFO) per share.
In the last reported quarter, this residential REIT surpassed estimate with respect to the FFO per share, recording a positive surprise of 1.25%. Results reflected increase in average rental rates and economic occupancy.
Over the last four quarters, the company surpassed estimates on two occasions for as many misses, the average negative surprise being 0.01%. 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
Though the coronavirus pandemic jeopardized the second half of the March-end quarter, the period had commenced on a positive note with a resilient economy and decent job-market strength. Therefore, the pandemic’s impact is likely to be more pronounced on real estate fundamentals in the second quarter than in the first.
Usually, demand for apartments slows down during the colder months as renters usually prefer less to move in winters. However, per a report from real estate technology and analytics firm RealPage, the U.S. apartment rental market’s performance in February was steady with national apartment occupancy in the month remaining at 95.5%, in line with January’s and up 30 basis points (bps) from the year-ago tally. Rent growth of 2.9% was also in line with the three-year average.
Amid this, AvalonBay is expected to have registered steady rental revenues, given its ownership of high-quality assets located in some of the premium markets of the country. Further, high home-ownership costs in several markets are affecting transitions from renters to homeowners. This, along with favorable demographics and household formation as well as job-market gains, is likely to have boosted occupancy at the company’s residential properties.
AvalonBay has withdrawn its full-year 2020 guidance in light of the coronavirus pandemic. Nevertheless, the company noted that for the two-month period ended Feb 29, 2020, total rental revenues from established communities grew 3.2% year over year. Blended like-term effective rent change for established communities over the two-month period was 1.6% compared with the 2.6% recorded during the same period last year.
Moreover, for the week ended Mar 22, 2020, the company had a physical occupancy rate of 96.1% for established communities compared with the 95.8% recorded during the same week of March 2019. Also, through the week ending Mar 22, blended like-term effective rent change for established communities for March 2020 was 2.3%, versus 2.9% for March 2019.
The Zacks Consensus Estimate of $601.3 million for first-quarter revenues suggests a 30.6% year-over-year increase. Further, the Zacks Consensus Estimate for the quarterly FFO per share is currently pinned at $2.40, indicating 4.4% year-on-year growth. The company is also expected to retain its balance-sheet strength.
AvalonBay has also been pursuing various initiatives to boost efficiency and margin expansion in its portfolio. It has deployed various technology-enabled productivity enhancements like developing online tour scheduling, as well as launching an AI and new maintenance platform. These efforts are likely to have provided the company a competitive edge over others.
However, the company’s activities during the quarter were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate was revised marginally downward over the past 30 days.
Notably, new apartment deliveries are anticipated to have remained elevated in a number of the company’s markets during the January-March quarter. This high supply is likely to strain rental rates. This apart, high concession activity is a concern.
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 carries a Zacks Rank of 3 and its Earnings ESP is -0.61%.
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:
SBA Communications Corporation (SBAC - Free Report) , set to report quarterly numbers on May 5, has an Earnings ESP of +0.67% and carries a Zacks Rank of 3 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Extra Space Storage Inc. (EXR - Free Report) , slated to release first-quarter earnings on May 6, has an Earnings ESP of +0.12% and carries a Zacks Rank of 3 at present.
Americold Realty Trust (COLD - Free Report) , expected to release earnings results around May 7, has an Earnings ESP of +9.74% and currently holds a Zacks Rank #3.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>