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AvalonBay (AVB) Up 3.6% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for AvalonBay Communities (AVB - Free Report) . Shares have added about 3.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is AvalonBay due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
AvalonBay Misses on Q4 FFO, Issues Bleak Q1 Outlook
AvalonBay’s fourth-quarter 2020 core FFO per share of $2.02 missed the Zacks Consensus Estimate of $2.09. The reported figure also declined 16.9% year over year from the prior-year quarter’s $2.43.
Total revenues of $555.8 million slipped 6.4% year over year. Also, the revenue figure marginally missed the Zacks Consensus Estimate of $556.6 million.
Results reflect decline in residential rental revenues on lease rates and concessions as well as uncollectible lease revenues. Moreover, the company has provided a soft first-quarter 2021 outlook.
AvalonBay noted that the timing and strength of recovery, mainly in the urban submarkets is more uncertain than the past cycles, though the transaction market is healthy with suburban assets trading at or above pre-pandemic values.
For full-year 2020, the core FFO per share came in at $8.69, 7% lower than the prior-year tally of $9.34 and missed the Zacks Consensus Estimate of $8.76 as well. Revenues edged down 1% year on year to $2.3 billion.
The company also noted about the residential revenue collections for established communities, through Jan 31. Collected residential revenues for the fourth quarter improved to 95.9% as of Jan 31 from 94.8% at fourth-quarter end. In addition, the third-quarter rent collections were 97.1%, up from 95.2% at third-quarter end, while second-quarter rent collections improved to 98.1% as of Jan 31 from 95.4% at second-quarter end. Collected residential revenues for January 2021 was 92.9% as of Jan 31.
Quarter in Detail
In the reported quarter, revenues from established communities decreased 8.7% year over year to nearly $486 million. Dismal residential and commercial uncollectible lease revenues resulted in this decrease.
Operating expenses for established communities flared up 5.8% on a year-over-year basis. Consequently, net operating income (NOI) from established communities dropped 14.3% year on year to $328.6 million.
During the October-December period, the company accomplished the development of four consolidated apartment communities. The communities contain 1,044 apartment homes and were constructed for $385 million.
As of Dec 31, 2020, AvalonBay had 16 consolidated development communities under construction (expected to contain 5,128 apartment homes and 62,000 square feet of commercial space). The estimated total capital cost at completion for these development communities is $1.95 billion.
In the December-end quarter, the company acquired three land parcels for future development, for a total investment of $77.35 million. During the same period, the company sold six wholly-owned operating communities for a total of $444.1 million, leading to an economic gain of $160.5 million.
During the fourth quarter, the company sold 11 of the 172 residential condominiums at The Park Loggia, in New York, NY, for gross proceeds of $33.86 million.
BalanceSheet Position
As of Dec 31, 2020, AvalonBay did not have any borrowings outstanding under its $1.75-billion unsecured credit facility. The company had $313.5 million in unrestricted cash and cash in escrow as of the same date. In addition, its annualized net debt-to-core EBITDAre for the October-December quarter was 5.4 times and unencumbered NOI was 94%.
Stock-Repurchase Program
Last July, AvalonBay’s board of directors approved a new stock-repurchase program, under which it might acquire shares of its common stock up to an aggregate purchase price of $500 million in open market or negotiated transactions. There is no expiration date for this stock-repurchase program. In the fourth quarter, the company repurchased 313,057 shares of common stock at an average price of $148.25 per share under this program.
Outlook
For first-quarter 2021, the company expects core FFO per share in the range of $1.85 and $1.95.
The company expects established communities residential revenues to be down 8.5-10%, operating expense to flare up 2.8-5.8% and NOI to slip 13.2-16.2%.
For full-year 2021, the company projects total capital cost for development starts of $650-$850 million, total capital cost for development completions of $1.1 billion and projected NOI from development communities of $40-$50 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -7.29% due to these changes.
VGM Scores
At this time, AvalonBay has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise AvalonBay has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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AvalonBay (AVB) Up 3.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for AvalonBay Communities (AVB - Free Report) . Shares have added about 3.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is AvalonBay due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
AvalonBay Misses on Q4 FFO, Issues Bleak Q1 Outlook
AvalonBay’s fourth-quarter 2020 core FFO per share of $2.02 missed the Zacks Consensus Estimate of $2.09. The reported figure also declined 16.9% year over year from the prior-year quarter’s $2.43.
Total revenues of $555.8 million slipped 6.4% year over year. Also, the revenue figure marginally missed the Zacks Consensus Estimate of $556.6 million.
Results reflect decline in residential rental revenues on lease rates and concessions as well as uncollectible lease revenues. Moreover, the company has provided a soft first-quarter 2021 outlook.
AvalonBay noted that the timing and strength of recovery, mainly in the urban submarkets is more uncertain than the past cycles, though the transaction market is healthy with suburban assets trading at or above pre-pandemic values.
For full-year 2020, the core FFO per share came in at $8.69, 7% lower than the prior-year tally of $9.34 and missed the Zacks Consensus Estimate of $8.76 as well. Revenues edged down 1% year on year to $2.3 billion.
The company also noted about the residential revenue collections for established communities, through Jan 31. Collected residential revenues for the fourth quarter improved to 95.9% as of Jan 31 from 94.8% at fourth-quarter end. In addition, the third-quarter rent collections were 97.1%, up from 95.2% at third-quarter end, while second-quarter rent collections improved to 98.1% as of Jan 31 from 95.4% at second-quarter end. Collected residential revenues for January 2021 was 92.9% as of Jan 31.
Quarter in Detail
In the reported quarter, revenues from established communities decreased 8.7% year over year to nearly $486 million. Dismal residential and commercial uncollectible lease revenues resulted in this decrease.
Operating expenses for established communities flared up 5.8% on a year-over-year basis. Consequently, net operating income (NOI) from established communities dropped 14.3% year on year to $328.6 million.
During the October-December period, the company accomplished the development of four consolidated apartment communities. The communities contain 1,044 apartment homes and were constructed for $385 million.
As of Dec 31, 2020, AvalonBay had 16 consolidated development communities under construction (expected to contain 5,128 apartment homes and 62,000 square feet of commercial space). The estimated total capital cost at completion for these development communities is $1.95 billion.
In the December-end quarter, the company acquired three land parcels for future development, for a total investment of $77.35 million. During the same period, the company sold six wholly-owned operating communities for a total of $444.1 million, leading to an economic gain of $160.5 million.
During the fourth quarter, the company sold 11 of the 172 residential condominiums at The Park Loggia, in New York, NY, for gross proceeds of $33.86 million.
BalanceSheet Position
As of Dec 31, 2020, AvalonBay did not have any borrowings outstanding under its $1.75-billion unsecured credit facility. The company had $313.5 million in unrestricted cash and cash in escrow as of the same date. In addition, its annualized net debt-to-core EBITDAre for the October-December quarter was 5.4 times and unencumbered NOI was 94%.
Stock-Repurchase Program
Last July, AvalonBay’s board of directors approved a new stock-repurchase program, under which it might acquire shares of its common stock up to an aggregate purchase price of $500 million in open market or negotiated transactions. There is no expiration date for this stock-repurchase program. In the fourth quarter, the company repurchased 313,057 shares of common stock at an average price of $148.25 per share under this program.
Outlook
For first-quarter 2021, the company expects core FFO per share in the range of $1.85 and $1.95.
The company expects established communities residential revenues to be down 8.5-10%, operating expense to flare up 2.8-5.8% and NOI to slip 13.2-16.2%.
For full-year 2021, the company projects total capital cost for development starts of $650-$850 million, total capital cost for development completions of $1.1 billion and projected NOI from development communities of $40-$50 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -7.29% due to these changes.
VGM Scores
At this time, AvalonBay has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise AvalonBay has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.