AvalonBay Communities Inc. (AVB) – an apartment real estate investment trust (REIT) – is expected to beat expectations when it reports third-quarter 2013 results after the closing bell tomorrow, Wednesday, Oct 23.
Why a Likely Positive Surprise?
Our proven model shows that AvalonBay is likely to beat earnings since it has the appropriate combination of two key ingredients:
Positive Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +2.53%. This indicates a likely positive earnings surprise.
Zacks Rank #3 (Hold): AvalonBay’s Zacks Rank #3 increases the predictive power of its ESP. The combination of its Zacks Rank and Earnings ESP makes us confident of a positive earnings surprise in the to-be-reported quarter.
Stocks with a Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating the earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
Key Earnings Drivers
AvalonBay’s Class A assets located in some of the premium markets of the nation enable it to generate steady rental revenues. Moreover, the company, which along with Equity Residential (EQR) closed the Archstone acquisition in February, continues to aim for expansion in the high barrier-to-entry regions of the U.S. Also, its decent operating platform and growth prospects in the multifamily sector keep us optimistic. Consequently, the company has been performing favorably and has delivered an average earnings surprise of 0.25% over the last four quarters.
In addition, during the third-quarter, AvalonBay reaped about $396.2 million from the unsecured notes issue. The company planned to use it for paying off the outstanding debt and for other corporate needs. This activity strengthens the AvalonBay’s liquidity position and is thus notable.
Given the improving market fundamentals during the third quarter, we expect the company to post decent quarterly results with healthy trends in rental rates and occupancy levels.
Other Stocks to Consider
AvalonBay is not the only stock that is expected to perform well this earnings season. We also observe that there are other REITs, which are likely to beat earnings.
SL Green Realty Corp. (SLG) has an Earnings ESP of +1.56% and a Zacks Rank #2 (Buy). The company is scheduled to report its earnings on Oct 23, after the closing bell.
Prologis Inc. (PLD) has an Earnings ESP of +2.44% and a Zacks Rank #3 (Hold). The company is scheduled to report its earnings on Oct 23, before the opening bell.
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