It has been about a month since the last earnings report for AvalonBay Communities (AVB - Free Report) . Shares have added about 4.3% 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 Q2 FFO Beat Reflects Growth in Occupancy
AvalonBay Communities’ second-quarter 2018 FFO per share of $2.21 surpassed the Zacks Consensus Estimate of 2.19. The figure also recorded 16.3% growth from the year-ago figure of $1.90. Core FFO per share improved 6.7% year over year to $2.23.
Total revenues of $569.2 million increased 7.3% year over year, as revenues from stabilized operating communities and development communities recorded growth. The reported figure also outpaced the Zacks Consensus Estimate of $565.4 million. Results highlight growth in average rental rates and occupancy.
Quarter in Detail
For the reported quarter, average rental rates were up 2.3% year over year, while economic occupancy inched up 0.2% from the year-ago quarter.
Revenues from established communities — consolidated communities that have stabilized operations as of Jan 1, 2017, are neither executing nor planning any significant redevelopment work, and are not held for sale or planned for disposition within the current year — improved 2.6% year over year, indicating increase in average rental rates and economic occupancy.
Operating expenses for established communities escalated 1.8% on a year-over-year basis. Consequently, NOI from established communities increased 2.9 % year over year to around $299.1 million.
Notably, during the quarter under review, the company accomplished development of two communities, for an aggregate capital cost of $141.0 million. These communities comprise a total of 554 apartment homes. Further, the company began construction of three communities that are expected to contain 828 apartment homes and 23,000 square feet of retail space. These communities will be developed for an aggregate estimated cost of $265.0 million.
As of Jun 30, 2018, AvalonBay had 19 communities under construction (expected to contain in total 6,048 apartment homes and 120,000 square feet of retail space), which will likely be accomplished for an estimated total capital cost of $2.8 billion. This includes the company’s share of communities being developed through joint ventures.
As of Jun 30, 2018, AvalonBay had no borrowings outstanding under its $1.5-billion unsecured credit facility. The company had around $349.9 million in unrestricted cash and cash in escrow as of that date. In addition, the company’s annualized net debt-to-core EBITDA for second-quarter 2018 was 5.0 times.
For third-quarter 2018, AvalonBay expects core FFO per share of $2.22-$2.28. For full-year 2018, the company expects core FFO per share of $8.87-$9.07.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, AvalonBay has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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.
The company's stock is suitable solely for momentum based on our style scores.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, AvalonBay has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.