AvalonBay Communities, Inc. AVB, a leading real estate investment trust (REIT) specializing in the development, acquisition and management of multifamily properties, is set to announce its fourth-quarter and full-year 2024 results after the closing bell on Feb. 5.

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In the last reported quarter, this residential REIT delivered a surprise of 1.11% in terms of core funds from operations (FFO) per share. The quarterly results reflected a year-over-year increase in same-store residential revenues. 

Over the last four quarters, AvalonBay surpassed the Zacks Consensus Estimate on each occasion, the average beat being 1.49%. The graph below depicts the surprise history of the company:

AvalonBay Communities, Inc. Price and EPS Surprise

AvalonBay Communities, Inc. price-eps-surprise | AvalonBay Communities, Inc. Quote

As we approach the release of AvalonBay's fourth-quarter 2024 earnings report, it is important to examine how this residential REIT is likely to have performed amid the current market conditions.

US Apartment Market in Q4

Per RealPage data, the U.S. apartment demand surged to its highest level in almost three years in the fourth quarter of 2024, comfortably surpassing the record-high new supply seen that year.

Between October and December 2024, the U.S. apartment market absorbed 230,819 market-rate units, while 155,408 new units were delivered during the same period. Annual supply hit 588,883 units, while demand led to 666,699 units.

As demand exceeded supply, U.S. apartment occupancy saw a notable annual increase, reaching 94.8% in December. The annual occupancy change was 0.7%. However, rent growth remained stagnant due to the pressure of historically high new supply levels. Rents rose 0.5% in 2024, and the monthly effective rent change was down 0.3%. The average effective rent was $1,823.

Factors to Consider Ahead of AVB’s Q4 Results

AvalonBay’s focus on developing, acquiring and redeveloping multifamily properties in high-growth areas has driven strong occupancy and premium rents over the years. By leveraging technology and scale, the company enhances margins and maintains financial stability. 

However, in the fourth quarter, elevated supply in some markets is likely to have pressured rental rates and kept check on occupancy growth. Additionally, high interest rates increased borrowing costs, potentially constraining future acquisitions and developments. While AvalonBay remains committed to long-term value creation, these factors may have affected its near-term growth momentum.

Projections for AVB

AvalonBay noted in its mid-quarter update that its turnover remained lower than historical averages, aiding healthy occupancy levels as the slower leasing season approached.

We project economic occupancy of 95.8% in the quarter, while same-store average rental rates are projected to increase 0.9% year over year. We expect interest expenses to increase 19.7% year over year in the fourth quarter. 

The Zacks Consensus Estimate of $742.31 million for fourth-quarter revenues suggests a 5.3% year-over-year increase. 

For the fourth quarter of 2024, AvalonBay expected a core FFO per share in the range of $2.78-$2.88. Before the fourth-quarter earnings release, the company’s activities were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has remained unrevised at $2.83 over the past month. However, it suggests year-over-year growth of 3.3%.

For full-year 2024, AvalonBay expected core FFO per share between $10.99 and $11.09. For the full year, the Zacks Consensus Estimate for core FFO per share has remained unrevised at $11.04 over the past month. However, the figure indicates a 3.9% increase year over year on revenues of $2.91 billion.

For the full year, management expected same-store residential revenue growth to be 3.5% at the midpoint and operating expenses to increase by 4.5% at the midpoint. Same-store residential NOI growth is estimated at 3% at the midpoint.

Here is What Our Quantitative Model Predicts for AVB:

Our proven model does not conclusively predict a surprise in terms of FFO per share for AvalonBay this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here. 

AvalonBay currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.63%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are two stocks from the broader REIT sector — Ventas, Inc. VTR and $Vornado Realty Trust(VNO-N)$ VNO — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.

Ventas, scheduled to report quarterly numbers on Feb. 12, has an Earnings ESP of +0.89% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vornado is slated to report quarterly numbers on Feb. 10. VNO has an Earnings ESP of +2.25% and carries a Zacks Rank of 3 at present.

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

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