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AvalonBay (AVB) Up 0.1% 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 0.1% 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 the most recent earnings report in order to get a better handle on the important catalysts.

AvalonBay's Q3 FFO Misses, Revenues Beat Estimates

AvalonBay Communities’ third-quarter 2019 core FFO per share of $2.34 increased 2.6% year over year. However, the figure missed the Zacks Consensus Estimate by a penny.

This year-over-year growth indicates increase in average rental rates, while economic occupancy registered a decline.

Total revenues of $587.6 million were up 2% year over year. The revenue figure also surpassed the Zacks Consensus Estimate of $585.9 million.

Quarter in Detail   

In the reported quarter, revenues from established communities improved 2.7% year over year to $461.2 million. Results reflect a 2.9% increase in average rental rates, while economic occupancy edged down 0.2%.

Operating expenses for established communities flared up 4.2% on a year-over-year basis. Consequently, NOI from established communities increased 2.1% year on year to around $327 million.

During the third quarter, the company acquired two communities — Portico at Silver Spring Metro, in Silver Spring, MD, comprising 151 apartment homes for $43.45 million and Avalon Bonterra, in Hialeah, FL, containing 314 apartment homes for $90 million.

The company sold four wholly-owned operating communities for $259.6 million, leading to a gain of $130.4 million in accordance with GAAP. These included AVA Stamford, in Stamford, CT; Archstone Lexington, in Flower Mound, TX; Memorial Heights Villages, in Houston, TX; and
Avalon Orchards, in Marlborough, MA. With the sale of Archstone Lexington and Memorial Heights Villages, the company completed its exit from the Texas market.

Further, during the quarter, the company completed the development of AVA Esterra Park, in Redmond, WA, comprising 323 apartment homes, for a total capital cost of $91 million.

As of Sep 30, 2019, AvalonBay had 20 communities under construction (expected to contain in total 6,700 apartment homes and 94,000 square feet of retail space), which will likely be accomplished for a projected total capital cost of $2.5 billion.

Balance-Sheet Position

As of Sep 30, 2019, AvalonBay did not have any borrowings outstanding under its $1.75-billion unsecured credit facility. The company had around $334.75 million in unrestricted cash and cash in escrow as of the same date. In addition, the company’s annualized net debt-to-core EBITDA for the July-September quarter was 4.7 times.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, AvalonBay has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.

Outlook

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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