Avalonbay Earnings: FFO Higher Than Management's Guidance, Though Dispositions May Slow FFO Growth

Avalonbay Communities reported second-quarter results that were relatively in line with our expectations, giving us confidence in our $221 fair value estimate for the no-moat company. Same-store occupancy improved 10 basis points sequentially to 96.0% in the second quarter. Since average rental rates were up 3.2% year over year, same-store revenue was also up 3.2%, which was relatively in line with our estimate of 2.9% growth. Same-store operating expenses were up slightly higher at 3.8% in the quarter, so same-store net operating income, or NOI, growth was 3.0%, though that was better than our estimate of 2.7% same-store NOI growth. The company reported core funds from operations, or FFO, of $2.77 per share in the second quarter, which was a penny better than our $2.76 estimate and nine cents better than the $2.68 guidance management had previously given for the second quarter.