On Aug 13, Zacks Investment Research upgraded
AvalonBay Communities Inc.
) to a Zacks Rank #2 (Buy). This apartment real estate investment
trust (REIT) posted decent second-quarter 2013 results and raised
its outlook for the year. We believe any short-term weakness in
the price (the stock was down 1.01% during yesterday's regular
trading session) should be viewed as a good buying opportunity
given its solid growth prospects in the multifamily apartment
Why the Upgrade?
Aided by growth in rental revenue, AvalonBay reported core
funds from operations (FFO) of $1.62 per share in the second
quarter of 2013 that was 20.9% ahead of the prior-year quarter
figure. Improved results from its operating portfolio and leasing
of new development communities have helped the company post
encouraging quarterly results. Including non-routine items, FFO
per share ascended 15.7% year over year to $1.55 from $1.34 in
the prior-year period.
Total revenue during the reported quarter increased 49.0% year
over year to $390.1 million and same store revenue and net
operating income (NOI) results have surpassed expectations.
Therefore, prompted by decent multi-family operating
fundamentals, the company raised its revenue, NOI and adjusted
FFO growth outlook. This upward revision of the guidance also
boosts investors' confidence.
The company, which along with
) closed the Archstone acquisition in February, continues to aim
for expansion in the high barrier-to-entry regions of the U.S.
Moreover, its decent operating platform and prospects for growth
in the multifamily sector keep us optimistic.
Following the solid performance and guidance hike analysts
became more constructive on the stock's future performance. This
is evident from the movement witnessed in the Zacks Consensus
Estimate that remained flat at $6.19 for 2013 and rose 0.1% to
$6.91 per share for 2014 in the past 7 days.
AVALONBAY CMMTY (AVB): Free Stock Analysis
BRE PROPERTIES (BRE): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
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Additionally, the long-term earnings growth forecast for the
company is 9.28%. Hence, the favorable estimate revisions, driven
by positive second-quarter results and expansion efforts made way
for the upgrade in the rank.
Other Stocks to Consider
Apart from AvalonBay, the other stocks worth considering in the
REIT industry include
BRE Properties Inc.
), both carrying a Zacks Rank #2 (Buy).
FFO, a widely used metric to gauge the performance of REITs,
are obtained after adding depreciation and amortization and other
non-cash expenses to net income.