When a company posts strong earnings, shareholders are thrilled. When they post strong earnings and raise forward estimates and guidance, then you really have a perfect storm of data that can drive shares higher. In a new report from Jefferies, the real estate investment trust (REIT) analyst likes a group of companies that they expect to post very solid earnings reports, or that perhaps already have.
The Jefferies team singles out seven companies that they feel will report strong earnings, and three of those they also think will raise earnings guidance. Those are the three we focus on here: AvalonBay Communities Inc. (NYSE: AVB), Essex Property Trust Inc. (NYSE: ESS) and Extra Space Storage Inc. (NYSE: EXR). It is important to remember that REIT distributions may contain return of capital.
This company is in the business of developing, redeveloping, acquiring and managing apartment communities in the leading metropolitan areas in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States. AvalonBay currently holds a direct or indirect ownership interest in 277 apartment communities containing 82,487 apartment homes in 11 states and the District of Columbia, of which 26 communities were under construction and eight communities were under reconstruction.
By focusing on high-growth, high-demand areas in the Unites States, AvalonBay has become one of the premier apartment REITs on Wall Street. The Jefferies research indicates that channel occupancy rates are 0.5% to 1.5% higher for the first quarter of 2015, despite the fact the many REITs pushing rents higher and still fairly robust development pipelines. The analysts feel that this could drive growth acceleration, leading to strong earnings results being reported.
AvalonBay unitholders are paid a solid 2.9% distribution. The Jefferies price target is lifted from $195 to $198. The Thomson/First Call consensus price target is $182.05. The shares closed on Monday at $171.27. The company reported strong earnings after the close Monday, beating consensus estimates and raising guidance.