Last week saw the newest yearly earnings release from AvalonBay Communities, Inc. (NYSE:AVB), an important milestone in the company's journey to build a stronger business. Results were roughly in line with estimates, with revenues of US$2.3b and statutory earnings per share of US$5.63. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what analysts are expecting for next year.
Following the latest results, AvalonBay Communities's twelve analysts are now forecasting revenues of US$2.43b in 2020. This would be a modest 4.4% improvement in sales compared to the last 12 months. Statutory earnings per share are forecast to decline 11% to US$5.00 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$2.43b and earnings per share (EPS) of US$4.99 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
Analysts reconfirmed their price target of US$228, showing that the business is executing well and in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic AvalonBay Communities analyst has a price target of US$248 per share, while the most pessimistic values it at US$202. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the AvalonBay Communities's past performance and to peers in the same market. It's pretty clear that analysts expect AvalonBay Communities's revenue growth will slow down substantially, with revenues next year expected to grow 4.4%, compared to a historical growth rate of 5.6% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.1% next year. So it's pretty clear that, while AvalonBay Communities's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for AvalonBay Communities going out to 2024, and you can see them free on our platform here.
It might also be worth considering whether AvalonBay Communities's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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