A month has gone by since the last earnings report for AvalonBay Communities (AVB - Free Report) . Shares have added about 1% in that time frame, underperforming 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's Q4 Revenues Beat Estimates, Dividend Up
AvalonBay Communities’ fourth-quarter 2018 core FFO per share of $2.31 missed the Zacks Consensus Estimate of $2.32. However, the figure matched the mid-point of the company’s core FFO per share outlook issued in October and also mirrored an improvement of 2.7% from the year-ago tally of $2.25.
Total revenues of $578.5 million were up 4.2% year over year, as revenues from stabilized operating communities and development communities recorded growth. The reported figure also outpaced the Zacks Consensus Estimate of $575.1 million. Results highlight growth in average rental rates. The company also announced a 3.4% hike in its quarterly dividend.
Quarter in Detail
In the reported quarter, average rental rates were up 2.7% year over year, while economic occupancy remained flat at 96.1%.
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 2.7% year over year to $412.5 million. This indicates increase in average rental rates.
Operating expenses for established communities escalated 2.7% on a year-over-year basis. Consequently, NOI from established communities increased 2.7% year over year to around $298.0 million.
As of Dec 31, 2018, AvalonBay had 21 communities under construction (expected to contain in total 6,609 apartment homes and 87,000 square feet of retail space), which will likely be accomplished for a projected total capital cost of $2.4 billion. However, the development pipeline excluded 15 West 61st Street for which the company is pursuing a potential for-sale strategy of individual condominium units for the residential part.
As of Dec 31, 2018, AvalonBay did not have any borrowings outstanding under its $1.5-billion unsecured credit facility. The company had around nearly $217.9 million in unrestricted cash and cash in escrow as of that date. In addition, the company’s annualized net debt-to-core EBITDA for the Oct-Dec quarter was 4.6 times.
Moreover, the company sold 244,924 shares of common stock at an average sales price of $189.14 per share, reaping net proceeds of $45.6 million under its current continuous equity program established in December 2015.
For full-year 2019, the company expects core FFO per share of $9.05-$9.55.
AvalonBay’s board of directors announced first-quarter 2019 dividend of $1.52 per share, reflecting a 3.4% increase from the prior-quarter payout of $1.47 per share. This dividend will be paid on Apr 15, to common stockholders of record as of Mar 29, 2019.
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 lot better with an A. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, AvalonBay has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.