What to Expect From AvalonBay Communities in Q2 Earnings?

AvalonBay Communities, Inc. AVB, a leading real estate investment trust (REIT) specializing in the development, acquisition and management of multifamily properties, is set to announce its second-quarter 2025 results after the closing bell on July 30.In the last reported quarter, this residential REIT delivered a surprise of 1.07% in terms of core funds from operations (FFO) per share. The quarterly results reflected a year-over-year increase in same-store residential revenues, though higher interest expenses played a spoilsport. Over the past four quarters, AvalonBay surpassed the Zacks Consensus Estimate on three occasions and missed on the other, the average beat being 0.83 %. The graph below depicts the surprise history of the company:AvalonBay Communities, Inc. Price and EPS Surprise AvalonBay Communities, Inc. price-eps-surprise | AvalonBay Communities, Inc. QuoteAs we approach the release of AvalonBay's second-quarter 2025 earnings report, it is important to examine how this residential REIT is likely to have performed amid the current market conditions.US Apartment Market in Q2The U.S. apartment market remained impressively resilient in the second quarter of 2025, absorbing more than 227,000 units between April and June, a robust second-quarter figure. According to RealPage data, annual absorption surpassed even the peak leasing surge of 2021 and early 2022, defying a backdrop of slowing job growth, weak business sentiment and broader economic uncertainty.While rent growth stayed muted, up just 0.19% in June, occupancy climbed steadily. At 95.6% in June, national occupancy rose 140 basis points year over year. Operators appear focused on maximizing occupancy, even if it means sacrificing rent increases. This “heads-in-beds” approach supports stability during a period of high new supply. Supply, though moderating, remains historically elevated. More than 535,000 units were completed in the past year, with roughly 108,000 delivered in the second quarter alone. Yet, the market’s ability to digest this volume underscores its underlying strength.Regionally, tech-driven markets like San Francisco and San Jose, as well as Boston and New York, gained momentum — likely aided by easing supply and increased return-to-office trends. Sun Belt markets, such as Dallas, Atlanta and Jacksonville, FL, also showed signs of recovery in the second quarter, sustaining robust demand amid declining deliveries. Tourism-dependent cities, like Las Vegas, Orlando, FL, and Nashville, TN, faltered slightly, possibly reflecting softening discretionary spending. Supply-heavy markets like Austin, Phoenix and Denver continued to see the sharpest rent cuts.Factors to Consider Ahead of AVB’s Q2 ResultsAvalonBay has high-quality assets located in some of the premium markets of the country, which enable the company to generate steady rental revenues. It mainly focuses on adding properties in the leading metropolitan areas where the market is characterized by growing employment in high-wage sectors of the economy, higher homeownership costs and a diverse and vibrant quality of life. Its portfolio is well diversified with its same-store portfolio, comprising a decent number of both suburban and urban assets.AvalonBay’s strategy of targeting high-growth markets through development, acquisition and redevelopment of multifamily assets has consistently supported solid occupancy and premium pricing. Its use of technology and operational scale continues to drive margin efficiency and financial resilience, and these trends are likely to have sustained into the second quarter. Despite elevated supply in some markets, AVB is likely to have experienced healthy occupancy growth. It is also expected to have continued experiencing solid balance sheet strength in the quarter under review. However, high interest rates are likely to have kept interest expenses elevated.Projections for AVBIn a mid-quarter operating update, AvalonBay disclosed that for the two months ended May 31, 2025, the company experienced a 3% year-over-year increase in same-store residential revenues, exceeding its internal projections by 35 basis points. Improved occupancy levels and other rental revenues were the primary factors behind the outperformance. Occupancy remained strong at 96.3%, ahead of the 96% experienced in the first quarter, and like-term effective rent change improved from 1.7% in the first quarter to 2.3% in April and May.We project economic occupancy of 96.2% in the quarter, up 20 basis points sequentially, while same-store average rental rates are projected to increase 2.2% year over year. We expect same-store net operating income (NOI) to grow 1.3% year over year. Further, we expect interest expenses to rise 9.7% year over year in the second quarter. The Zacks Consensus Estimate of $761.75 million for second-quarter revenues suggests a 4.92% year-over-year increase. For the second quarter of 2025, AvalonBay expected core FFO per share in the range of $2.72-$2.82.Before the second-quarter earnings release, the company’s activities were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has been revised a cent south to $2.80 over the past two months. However, it suggests year-over-year growth of 1.08%.Here Is What Our Quantitative Model Predicts for AVB:Our proven model predicts a surprise in terms of FFO per share for AvalonBay this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.AvalonBay currently carries a Zacks Rank of 2 and has an Earnings ESP of +0.02%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Other Stocks That Warrant a LookHere are two other stocks from the residential REIT sector, American Homes 4 Rent AMH and Independence Realty Trust, Inc. IRT, you may want to consider as our model shows that these also have the right combination of elements to report an FFO beat this quarter.American Homes 4 Rent, scheduled to report quarterly numbers on July 31, has an Earnings ESP of +0.33% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.Independence Realty Trust is slated to report quarterly numbers on July 30. IRT has an Earnings ESP of +0.79% and carries a Zacks Rank of 3 at present.Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AvalonBay Communities, Inc. (AVB): Free Stock Analysis Report Independence Realty Trust, Inc. (IRT): Free Stock Analysis Report American Homes 4 Rent (AMH): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks