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AvalonBay Gives Solid Q1 Operating Update: Are you Buying?

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In the recently issued operating update for the first quarter of 2016, AvalonBay Communities, Inc.AVB said that it expects total rental revenue for established communities to grow 5.4-5.6% year over year.

AvalonBay revealed that this growth expectation is in sync with its previously projected first-quarter performance that is needed to realize full-year 2016 revenue growth assumptions of established communities.

Notably, at the time of its fourth-quarter 2015 earnings release, this residential real estate investment trust (REIT) had projected 2016 revenue growth of established communities in a range of 4.25-5.5%. The REIT had also guided net operating income increase of 5.0-6.5%.

Further, for the first quarter, AvalonBay expects funds from operations ("FFO") per share in a range of $2.04-$2.10 and core FFO per share within $1.88-$1.94. For 2016, the company projects FFO per share in a range of $8.12-$8.52 and core FFO per share within $8.03-$8.43. This points to 9% growth in 2016 core FFO per share.

Importantly, last month, this Zacks Rank #2 (Buy) stock came up with encouraging results for the fourth quarter, with core FFO per share increasing 14.4% year over year to $1.99. The figure also surpassed the Zacks Consensus Estimate of $1.96. Results were backed by growth in revenues from development as well as established communities. The company also announced an 8% increase in its quarterly dividend rate.

We expect this growth trend to continue at AvalonBay on the back of improving demand from household formation and favorable demographics. Yet, the completion of a number of projects in its markets, which would lead to higher supply, raises our concern.

Investors interested in the residential REIT industry may also consider Preferred Apartment Communities, Inc. APTS , Mid-America Apartment Communities Inc. MAA and Silver Bay Realty Trust Corp. SBY . Each of these stocks holds the same Zacks Rank as AvalonBay.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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AVALONBAY CMMTY (AVB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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