The Zacks Analyst Blog Highlights: AvalonBay Communities, Equity Residential, SL Green Realty, Prologis and FedEx

Zacks

For Immediate Release
 
Chicago, IL – October 23, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the AvalonBay Communities Inc. (AVB-Free Report), Equity Residential (EQR-Free Report), SL Green Realty Corp. (SLG-Free Report), Prologis Inc. (PLD-Free Report) and FedEx Corporation (FDX-Free Report).
 
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Here are highlights from Tuesday’s Analyst Blog:

Is AvalonBay (AVB) Poised to Beat?

AvalonBay Communities Inc. (AVB-Free Report) – 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-Free Report) 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-Free Report) 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-Free Report) 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.

FedEx Offers Flat-Rate Shipping

Leading freight carrier, FedEx Corporation (FDX-Free Report) announced that it is offering flat rate shipping to individual shippers and small business entities. The company’s new flat rate option is available on Express packages and is backed by the FedEx Express money back guarantee.

The FedEx One Rate price will be based on the type of packaging, selected service and distance. Given a predictable pricing model, the company believes customers can efficiently manage their shipping cost through a simplified one rate that offers time-definite delivery and value-added services.

The market reacted positively to the news and stock prices closed $1.19, up 0.7% from its opening on Monday, Oct 21, trading.

Apart from the flat shipping rate strategy that is aimed at attracting customers, FedEx remains successful in implementing higher shipping rates, which are imperative for revenue growth. Recently, the company provided rate hikes for 2014, including a 3.9% hike in shipping rates at FedEx Express for U.S. export and import services, with effect from Jan 6, 2014.

The company also indicated that it will provide information on rate hikes at FedEx Ground and FedEx SmartPost later this year. We expect these initiatives to substantially better the company’s earnings power over the next several years.

Further, FedEx has spread itsservices across the U.S., Canada and Mexico to capitalize on business opportunities in NAFTA (North American Free Trade agreement) markets. The company is mounting its Priority next-day services in its FedEx Freight segment by opening a new service centre in Rochester, New York and has also begun less-than-truckload (LTL) services to and from Canada. The new service centre will cater to 13 U.S. and Canadian markets dealing in cross border shipments to and from Toronto and Montreal.

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