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AvalonBay (AVB) Up 28.9% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for AvalonBay Communities (AVB - Free Report) . Shares have added about 28.9% 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 catalysts.
AvalonBay’s third-quarter 2020 core FFO per share of $2.06 missed the Zacks Consensus Estimate of $2.16. The reported tally also declined 12% year over year from the prior-year quarter’s $2.34.
Results reflect decline in residential rental revenues, driven by concessions, occupancy and uncollectible lease revenues. While weak same-store result is mainly due to the urban portfolio, the sub-urban portfolio is performing better.
Total revenues of $567.4 million slipped 3.4% year over year. However, the revenue figure surpassed the Zacks Consensus Estimate of $563 million.
The company also noted about the residential revenue collections for established communities, through Oct 27. The collected residential revenues for third quarter improved to 96.1% as of Oct 27 from 95.2% at quarter end. Moreover, collected residential revenues for October was 92.4% as of Oct 27, 2020.
Quarter in Detail
In the reported quarter, revenues from established communities decreased 6.1% year over year to $508.6 million. Residential and commercial uncollectible lease revenues resulted in this decrease.
Operating expenses for established communities flared up 3.5% on a year-over-year basis. Consequently, NOI from established communities dropped 10.1% year on year to $342.9 million.
During the July-September period, the company accomplished the development of Avalon Public Market in Emeryville, CA. It contains 289 apartment homes and was constructed for $175 million. As of Sep 30, 2020, AvalonBay had 17 consolidated development communities under construction (expected to contain 5,581 apartment homes and 64,000 square feet of commercial space). The estimated total capital cost at completion for these development communities is $2.1 billion.
As of Sep 30, 2020, the projected total capital cost of development rights decreased to $3.9 billion from the prior-quarter end’s $4.2 billion.
During the third quarter, the company sold a wholly-owned operating community — Avalon Towers — in Long Beach, NY, for $54 million, leading to an economic gain of $13.6 million.
Balance Sheet Position
As of Sep 30, 2020, AvalonBay did not have any borrowings outstanding under its $1.75-billion unsecured credit facility.The company had $182.4 million in unrestricted cash and cash in escrow as of the same date. In addition, its annualized net debt-to-core EBITDAre for the July-September quarter was 5.4 times and unencumbered NOI was 94%.
Stock-Repurchase Program
In July, AvalonBay’s board of directors also 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. Through the date of its third-quarter earnings release, the company repurchased 1,131,919 shares of common stock at an average price of $150.11 per share under this program.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, AvalonBay has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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. Notably, AvalonBay has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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AvalonBay (AVB) Up 28.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for AvalonBay Communities (AVB - Free Report) . Shares have added about 28.9% 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 catalysts.
AvalonBay Q3 FFO Lags Estimates, Urban Assets Struggle
AvalonBay’s third-quarter 2020 core FFO per share of $2.06 missed the Zacks Consensus Estimate of $2.16. The reported tally also declined 12% year over year from the prior-year quarter’s $2.34.
Results reflect decline in residential rental revenues, driven by concessions, occupancy and uncollectible lease revenues. While weak same-store result is mainly due to the urban portfolio, the sub-urban portfolio is performing better.
Total revenues of $567.4 million slipped 3.4% year over year. However, the revenue figure surpassed the Zacks Consensus Estimate of $563 million.
The company also noted about the residential revenue collections for established communities, through Oct 27. The collected residential revenues for third quarter improved to 96.1% as of Oct 27 from 95.2% at quarter end. Moreover, collected residential revenues for October was 92.4% as of Oct 27, 2020.
Quarter in Detail
In the reported quarter, revenues from established communities decreased 6.1% year over year to $508.6 million. Residential and commercial uncollectible lease revenues resulted in this decrease.
Operating expenses for established communities flared up 3.5% on a year-over-year basis. Consequently, NOI from established communities dropped 10.1% year on year to $342.9 million.
During the July-September period, the company accomplished the development of Avalon Public Market in Emeryville, CA. It contains 289 apartment homes and was constructed for $175 million. As of Sep 30, 2020, AvalonBay had 17 consolidated development communities under construction (expected to contain 5,581 apartment homes and 64,000 square feet of commercial space). The estimated total capital cost at completion for these development communities is $2.1 billion.
As of Sep 30, 2020, the projected total capital cost of development rights decreased to $3.9 billion from the prior-quarter end’s $4.2 billion.
During the third quarter, the company sold a wholly-owned operating community — Avalon Towers — in Long Beach, NY, for $54 million, leading to an economic gain of $13.6 million.
Balance Sheet Position
As of Sep 30, 2020, AvalonBay did not have any borrowings outstanding under its $1.75-billion unsecured credit facility.The company had $182.4 million in unrestricted cash and cash in escrow as of the same date. In addition, its annualized net debt-to-core EBITDAre for the July-September quarter was 5.4 times and unencumbered NOI was 94%.
Stock-Repurchase Program
In July, AvalonBay’s board of directors also 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. Through the date of its third-quarter earnings release, the company repurchased 1,131,919 shares of common stock at an average price of $150.11 per share under this program.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, AvalonBay has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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. Notably, AvalonBay has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.