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AvalonBay Communities, Inc.’s (AVB - Free Report) fourth-quarter 2016 core funds from operations (“FFO”) per share of $2.12 exceeded the Zacks Consensus Estimate of $2.10. The figure also grew 6.5% from the year-ago number of $1.99.
Growth in net operating income (“NOI”) from newly developed and existing operating communities attributed to this increase. However, the benefit was partly offset by a rise in interest expense. AvalonBay also declared a 5.2% hike in its quarterly dividend.
Total revenue of this residential real estate investment trust (“REIT”) climbed by 7.8% year over year to $518.2 million as revenues from development communities and stabilized operating communities reported growth. Total revenue also surpassed the Zacks Consensus Estimate of $516.2 million.
For full-year 2016, core FFO per share came in at $8.19, well ahead of the prior-year tally of $7.55. This was backed by a 10.2% year-over-year growth in total revenue to $2.04 billion.
Quarter in Detail
For the quarter, average rental rates were up 3.2% year over year with the highest increase coming in the Pacific North West portfolio (5.8%), followed by the South California (5.5%) and North California portfolio (3.0%).
Revenues from established communities – those that have stabilized operations as of Jan 1, 2015 and are neither executing nor planning any significant redevelopment work during the current year – improved 3.3% year over year. This improvement was driven by a 3.2% rise in average rental rates and 0.1% increase in economic occupancy.
However, operating expenses for established communities climbed 5.1% on a year-over-year basis. Consequently, net operating income from established communities rose 2.6% year over year to $276.2 million.
Solid Liquidity Position
As of Dec 31, 2016, AvalonBay had no borrowings outstanding under its $1.5-billion unsecured credit facility. The company had around $230.0 million in unrestricted cash and cash in escrow as of that date. Moreover, the company’s annualized net debt-to-core EBITDA for fourth-quarter 2016 was 5.0 times.
Dividend Hike
Concurrent with its earnings release, AvalonBay declared a 5.2% hike in its quarterly dividend rate. The company will now pay a dividend of $1.42 per share for first quarter 2017, up from $1.35 per share paid earlier. The new dividend will be paid on Apr 17 to common stockholders of record as of Mar 31, 2017.
Outlook
AvalonBay expects its FFO per share in the range of $2.09–$2.15 and core FFO per share in the band of $2.06–$2.12 for first-quarter 2017. Currently, the Zacks Consensus Estimate for the quarter is pegged at $2.12.
For 2017, the company projects FFO per share in the $8.59–$8.99 range and core FFO per share to lie in the $8.44–$8.84 band. Presently, the Zacks Consensus Estimate is pegged at $8.69.
In Conclusion
We are encouraged with AvalonBay’s better-than-expected performance in the reported quarter. Rising consumer confidence driven by job growth, sturdy balance sheet and favorable demographic pattern drive its growth prospects. In addition, the short-term nature of its leases would allow it maneuver rents quickly to rate hike. However, completion of a number of projects in its markets, leading to higher supply, is likely to result in moderation of rent growth. Further, there is a trend of increased concessions in some of the company’s markets.
Among other residential REITs, UDR Inc. (UDR - Free Report) came up with a better-than-expected performance for fourth-quarter 2016 supported by growth in revenues. The company reported FFO as adjusted per share of 46 cents, beating the Zacks Consensus Estimate by a penny. The figure was also higher than the prior-year quarter tally of 42 cents. (Read more: UDR Beats on Q4 FFO Estimates; Revenue Up Y/Y)
Equity Residential (EQR - Free Report) came up with fourth-quarter 2016 normalized FFO per share of 79 cents, in line with the Zacks Consensus Estimate. However, it was down from the 93 cents reported in the year-ago quarter. (Read more: Equity Residential Meets Q4 Estimates; Revenues Top)
We now look forward to the results of the other residential REIT – Essex Property Trust Inc. (ESS - Free Report) – slated to report its fourth-quarter results today.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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AvalonBay (AVB) Q4 FFO Beats Estimates, Dividend Raised
AvalonBay Communities, Inc.’s (AVB - Free Report) fourth-quarter 2016 core funds from operations (“FFO”) per share of $2.12 exceeded the Zacks Consensus Estimate of $2.10. The figure also grew 6.5% from the year-ago number of $1.99.
Growth in net operating income (“NOI”) from newly developed and existing operating communities attributed to this increase. However, the benefit was partly offset by a rise in interest expense. AvalonBay also declared a 5.2% hike in its quarterly dividend.
Total revenue of this residential real estate investment trust (“REIT”) climbed by 7.8% year over year to $518.2 million as revenues from development communities and stabilized operating communities reported growth. Total revenue also surpassed the Zacks Consensus Estimate of $516.2 million.
For full-year 2016, core FFO per share came in at $8.19, well ahead of the prior-year tally of $7.55. This was backed by a 10.2% year-over-year growth in total revenue to $2.04 billion.
Quarter in Detail
For the quarter, average rental rates were up 3.2% year over year with the highest increase coming in the Pacific North West portfolio (5.8%), followed by the South California (5.5%) and North California portfolio (3.0%).
Revenues from established communities – those that have stabilized operations as of Jan 1, 2015 and are neither executing nor planning any significant redevelopment work during the current year – improved 3.3% year over year. This improvement was driven by a 3.2% rise in average rental rates and 0.1% increase in economic occupancy.
However, operating expenses for established communities climbed 5.1% on a year-over-year basis. Consequently, net operating income from established communities rose 2.6% year over year to $276.2 million.
Solid Liquidity Position
As of Dec 31, 2016, AvalonBay had no borrowings outstanding under its $1.5-billion unsecured credit facility. The company had around $230.0 million in unrestricted cash and cash in escrow as of that date. Moreover, the company’s annualized net debt-to-core EBITDA for fourth-quarter 2016 was 5.0 times.
Dividend Hike
Concurrent with its earnings release, AvalonBay declared a 5.2% hike in its quarterly dividend rate. The company will now pay a dividend of $1.42 per share for first quarter 2017, up from $1.35 per share paid earlier. The new dividend will be paid on Apr 17 to common stockholders of record as of Mar 31, 2017.
Outlook
AvalonBay expects its FFO per share in the range of $2.09–$2.15 and core FFO per share in the band of $2.06–$2.12 for first-quarter 2017. Currently, the Zacks Consensus Estimate for the quarter is pegged at $2.12.
For 2017, the company projects FFO per share in the $8.59–$8.99 range and core FFO per share to lie in the $8.44–$8.84 band. Presently, the Zacks Consensus Estimate is pegged at $8.69.
In Conclusion
We are encouraged with AvalonBay’s better-than-expected performance in the reported quarter. Rising consumer confidence driven by job growth, sturdy balance sheet and favorable demographic pattern drive its growth prospects. In addition, the short-term nature of its leases would allow it maneuver rents quickly to rate hike. However, completion of a number of projects in its markets, leading to higher supply, is likely to result in moderation of rent growth. Further, there is a trend of increased concessions in some of the company’s markets.
AvalonBay currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AvalonBay Communities, Inc. Price, Consensus and EPS Surprise
AvalonBay Communities, Inc. Price, Consensus and EPS Surprise | AvalonBay Communities, Inc. Quote
Among other residential REITs, UDR Inc. (UDR - Free Report) came up with a better-than-expected performance for fourth-quarter 2016 supported by growth in revenues. The company reported FFO as adjusted per share of 46 cents, beating the Zacks Consensus Estimate by a penny. The figure was also higher than the prior-year quarter tally of 42 cents. (Read more: UDR Beats on Q4 FFO Estimates; Revenue Up Y/Y)
Equity Residential (EQR - Free Report) came up with fourth-quarter 2016 normalized FFO per share of 79 cents, in line with the Zacks Consensus Estimate. However, it was down from the 93 cents reported in the year-ago quarter. (Read more: Equity Residential Meets Q4 Estimates; Revenues Top)
We now look forward to the results of the other residential REIT – Essex Property Trust Inc. (ESS - Free Report) – slated to report its fourth-quarter results today.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>