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Here's Why You Should Hold AvalonBay (AVB) Stock Right Now

Residential REIT AvalonBay Communities Inc. AVB has high-quality assets located in some of the premium markets of the country, which enable the company to generate steady rental revenues. The company’s properties generally command the highest rents in its markets.

The REIT is also leveraging technology, scale and organizational capabilities to drive innovation and margin expansion in its portfolio. This has become all the more essential in this social-distancing era, as the virus outbreak needed a quick shift to virtual operations for the continuity of normal business operations.

AvalonBay’s second-quarter results reflected uncollectible lease revenues from residential and retail properties as well as decline in economic occupancy. However, the company noted that through Jul 28, 2020, collected residential revenues improved to 97.7% for April compared with the 93.9% at month end, 96.4% for May compared with the 92.8% at month end, and 95.5% for June compared with the 93.6% at month end. Moreover, collected residential revenues for July totaled 93.3% as of Jul 28, 2020.

Nonetheless, the coronavirus pandemic has given rise to macroeconomic uncertainty and a dismal job-market environment, resulting in household contraction and consolidation. Apart from these, a number of factors are affecting rental demand, including the pandemic and work-from-home flexibility, that is resulting in a shift of some renter demand away from higher cost and urban/infill markets.

In addition, record-low mortgage rates and the desire for space are spurring homes sales. Moreover, there is a decline in demand from two categories of renters — corporate and students — since most temporary corporate assignments have been canceled, while higher education institutions are adopting remote-learning models and limiting on-campus activities for this fall. Thus, there is a reduced demand in many urban sub-markets.

Also, rent-paying capabilities of tenants have been affected amid this situation. Given the magnitude of the downturn as well as eviction moratorium in many of its markets, higher-than-normal bad debt is likely to prevail in the near term. Furthermore, amid a slowdown in demand, concession activity is likely to be high.

Shares of this Zacks Rank #3 (Hold) company have lost 3.3% over the past three months, wider than its industry’s decline of 2.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nevertheless, the recent estimate revision for current-year funds from operations (FFO) per share indicates a favorable trend, with the Zacks Consensus Estimate marginally moving up to $9.03 over the past week.

 

Stocks to Consider

Duke Realty Corporation’s DRE Zacks Consensus Estimate for 2020 FFO per share has been revised 3.5% upward to $1.49 over the past month. The company currently carries a Zacks Rank #2 (Buy).

Cousins Properties Incorporated’s CUZ FFO per share estimate for the ongoing year has moved 1.1% north to $2.77 over the past month. The company currently carries a Zacks Rank of 2.

Four Corners Property Trust, Inc.’s FCPT FFO per share estimate for 2020 has moved up 9.2% to $1.43 over the past month. It currently carries a Zacks Rank of 2.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Duke Realty Corporation (DRE): Free Stock Analysis Report
 
Cousins Properties Incorporated (CUZ): Free Stock Analysis Report
 
AvalonBay Communities, Inc. (AVB): Free Stock Analysis Report
 
Four Corners Property Trust, Inc. (FCPT): 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.

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