A month has gone by since the last earnings report for AvalonBay Communities, Inc. (NYSE:AVB) . Shares have added about 4.2% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 Q4 FFO Beats Estimates, Dividend Raised
AvalonBay’s fourth-quarter 2016 core FFO per share of $2.12 exceeded the Zacks Consensus Estimate of $2.10. The figure also grew 6.5% from the year-ago number of $1.99.
Growth in NOI from newly developed and existing operating communities attributed to this increase. However, the benefit was partly offset by a rise in interest expense. AvalonBay also declared a 5.2% hike in its quarterly dividend.
Total revenue of this residential REIT climbed by 7.8% year over year to $518.2 million as revenues from development communities and stabilized operating communities reported growth. Total revenue also surpassed the Zacks Consensus Estimate of $516.2 million.
For full-year 2016, core FFO per share came in at $8.19, well ahead of the prior-year tally of $7.55. This was backed by a 10.2% year-over-year growth in total revenue to $2.04 billion.
Quarter in Detail
For the quarter, average rental rates were up 3.2% year over year with the highest increase coming in the Pacific North West portfolio (5.8%), followed by the South California (5.5%) and North California portfolio (3.0%).
Revenues from established communities – those that have stabilized operations as of Jan 1, 2015 and are neither executing nor planning any significant redevelopment work during the current year – improved 3.3% year over year. This improvement was driven by a 3.2% rise in average rental rates and 0.1% increase in economic occupancy.
However, operating expenses for established communities climbed 5.1% on a year-over-year basis. Consequently, net operating income from established communities rose 2.6% year over year to $276.2 million.
Solid Liquidity Position
As of Dec 31, 2016, AvalonBay had no borrowings outstanding under its $1.5-billion unsecured credit facility. The company had around $230.0 million in unrestricted cash and cash in escrow as of that date. Moreover, the company’s annualized net debt-to-core EBITDA for fourth-quarter 2016 was 5.0 times.
Dividend Hike
Concurrent with its earnings release, AvalonBay declared a 5.2% hike in its quarterly dividend rate. The company will now pay a dividend of $1.42 per share for first quarter 2017, up from $1.35 per share paid earlier. The new dividend will be paid on Apr 17 to common stockholders of record as of Mar 31, 2017.
Outlook
AvalonBay expects its FFO per share in the range of $2.09–$2.15 and core FFO per share in the band of $2.06–$2.12 for first-quarter 2017.
For 2017, the company projects FFO per share in the $8.59–$8.99 range and core FFO per share to lie in the $8.44–$8.84 band.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
VGM Scores
At this time, AvalonBay's stock has a subpar Growth Score of 'F', however its Momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'F' on the value side, putting it in the fifth quintile 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.
Based on our styles scores, the company's stock is suitable solely for momentum investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
AvalonBay Communities, Inc. (AVB): Free Stock Analysis Report
Original post
Zacks Investment Research