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Is a Beat in Store for AvalonBay (AVB) This Earnings Season?
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AvalonBay Communities, Inc. (AVB - Free Report) is slated to report first-quarter 2022 earnings on Apr 27 after market close. The company’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this residential real estate investment trust (REIT) delivered a surprise of 1.34% in terms of FFO per share. Results reflected a year-over-year increase in same-store residential revenues.
Over the last four quarters, AvalonBay surpassed the Zacks Consensus Estimate on all occasions, the average beat being 1.99%. 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 before this announcement.
Factors to Consider
For the U.S. apartment market, the first quarter — typically a slow leasing period in other years — appears to be a solid one this year, with impressive demand for rental units, due to the pandemic that disrupted seasonal behavior.
Per a report from the real estate technology and analytics firm, RealPage, the U.S. apartment market witnessed robust demand, with net demand for market-rate apartments aggregating a whopping 712,899 units nationally in the year ending the first quarter of 2022. This not only marks an 8% increase from the previous high a quarter earlier but also is 76% higher than the pre-pandemic-era highest established back in 2000. There is strong demand from young adults who are gaining from tight labor market conditions and record wage growth.
As a result of the high demand, the apartment occupancy inched up 0.1 percentage point to 97.6% instead of seasonal cooling in the first quarter. Rent growth reached another all-time high, with the new lease effective asking rents increasing 15.2% year over year through March.
AvalonBay, with its high-quality assets in some of the premium markets of the country, is likely to have benefited from the favorable environment. Moreover, AVB is banking on technology, scale and organizational capabilities to drive innovation and margin expansion in its portfolio. It is also likely to retain its balance sheet strength.
According to its operational update, AvalonBay witnessed improvements in the occupancy level and like-term effective rents through February. This residential REIT also reported a 7.3% increase in same-store residential rental revenues for two months ended Feb 28, 2022 compared with the prior-year period. This is roughly 60 basis points higher than the company’s initial expectation.
In the first-quarter operating update, AvalonBay reported that the economic occupancy for its same-store residential communities improved to 96.4% in February from 96.3% in January. This also marked an increase from 96.2% in the fourth quarter of 2021.
The like-term effective rent change for same-store residential communities improved to 12.7% in February from 12.4% in January. The figure also marked an increase from 11% in the fourth quarter. The like-term effective rent change for AVB’s suburban communities improved to 10.8% in February from 10.5% in January and 9.7% in the fourth quarter. In the case of urban communities, the like-term effective rent change improved to 17.5% from 16.9% in January and 14% in the fourth quarter.
The Zacks Consensus Estimate of $615.4 million for first-quarter revenues suggests an 11.7% year-over-year increase.
In the fourth-quarter earnings release, AvalonBay projected core FFO per share in the range of $2.14-$2.26 for the first quarter of 2022.
The Zacks Consensus Estimate for the January-March quarter’s FFO per share has moved a cent upward to $2.26 over the past week. Also, it suggests a year-over-year increase of 15.9%.
Here Is What Our Quantitative Model Predicts:
Our proven model predicts a 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 chances of an FFO beat, which is the case here.
AvalonBay currently carries a Zacks Rank of 3 and has an Earnings ESP of +0.19%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks That Warrant a Look
Here are three other stocks from the residential REIT sector — Equity Residential (EQR - Free Report) , Camden Property Trust (CPT - Free Report) and Essex Property Trust, Inc. (ESS - Free Report) — that you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter:
Equity Residential, slated to release first-quarter earnings on Apr 26, has an Earnings ESP of +0.50% and a Zacks Rank of 3 at present.
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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Is a Beat in Store for AvalonBay (AVB) This Earnings Season?
AvalonBay Communities, Inc. (AVB - Free Report) is slated to report first-quarter 2022 earnings on Apr 27 after market close. The company’s quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this residential real estate investment trust (REIT) delivered a surprise of 1.34% in terms of FFO per share. Results reflected a year-over-year increase in same-store residential revenues.
Over the last four quarters, AvalonBay surpassed the Zacks Consensus Estimate on all occasions, the average beat being 1.99%. 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 before this announcement.
Factors to Consider
For the U.S. apartment market, the first quarter — typically a slow leasing period in other years — appears to be a solid one this year, with impressive demand for rental units, due to the pandemic that disrupted seasonal behavior.
Per a report from the real estate technology and analytics firm, RealPage, the U.S. apartment market witnessed robust demand, with net demand for market-rate apartments aggregating a whopping 712,899 units nationally in the year ending the first quarter of 2022. This not only marks an 8% increase from the previous high a quarter earlier but also is 76% higher than the pre-pandemic-era highest established back in 2000. There is strong demand from young adults who are gaining from tight labor market conditions and record wage growth.
As a result of the high demand, the apartment occupancy inched up 0.1 percentage point to 97.6% instead of seasonal cooling in the first quarter. Rent growth reached another all-time high, with the new lease effective asking rents increasing 15.2% year over year through March.
AvalonBay, with its high-quality assets in some of the premium markets of the country, is likely to have benefited from the favorable environment. Moreover, AVB is banking on technology, scale and organizational capabilities to drive innovation and margin expansion in its portfolio. It is also likely to retain its balance sheet strength.
According to its operational update, AvalonBay witnessed improvements in the occupancy level and like-term effective rents through February. This residential REIT also reported a 7.3% increase in same-store residential rental revenues for two months ended Feb 28, 2022 compared with the prior-year period. This is roughly 60 basis points higher than the company’s initial expectation.
In the first-quarter operating update, AvalonBay reported that the economic occupancy for its same-store residential communities improved to 96.4% in February from 96.3% in January. This also marked an increase from 96.2% in the fourth quarter of 2021.
The like-term effective rent change for same-store residential communities improved to 12.7% in February from 12.4% in January. The figure also marked an increase from 11% in the fourth quarter. The like-term effective rent change for AVB’s suburban communities improved to 10.8% in February from 10.5% in January and 9.7% in the fourth quarter. In the case of urban communities, the like-term effective rent change improved to 17.5% from 16.9% in January and 14% in the fourth quarter.
The Zacks Consensus Estimate of $615.4 million for first-quarter revenues suggests an 11.7% year-over-year increase.
In the fourth-quarter earnings release, AvalonBay projected core FFO per share in the range of $2.14-$2.26 for the first quarter of 2022.
The Zacks Consensus Estimate for the January-March quarter’s FFO per share has moved a cent upward to $2.26 over the past week. Also, it suggests a year-over-year increase of 15.9%.
Here Is What Our Quantitative Model Predicts:
Our proven model predicts a 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 chances of an FFO beat, which is the case here.
AvalonBay currently carries a Zacks Rank of 3 and has an Earnings ESP of +0.19%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks That Warrant a Look
Here are three other stocks from the residential REIT sector — Equity Residential (EQR - Free Report) , Camden Property Trust (CPT - Free Report) and Essex Property Trust, Inc. (ESS - Free Report) — that you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter:
Equity Residential, slated to release first-quarter earnings on Apr 26, has an Earnings ESP of +0.50% and a Zacks Rank of 3 at present.
Camden Property Trust, scheduled to report quarterly figures on Apr 28, has an Earnings ESP of +1.25% and a Zacks Rank of 2 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Essex Property Trust, slated to report quarterly numbers on Apr 26, has an Earnings ESP of +0.18% and carries a Zacks Rank of 3.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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.