What to Expect From AvalonBay Communities Stock in Q3 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 third-quarter 2025 results after the closing bell on Oct. 29.In the last reported quarter, this residential REIT delivered a surprise of 0.71% in terms of core funds from operations (FFO) per share. The quarterly performance reflected favorable same-store residential revenue and operating expense performance. Over the past four quarters, AvalonBay surpassed the Zacks Consensus Estimate on three occasions and missed on the other, the average beat being 0.46%. 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 third-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 Q3After two years of robust growth, the U.S. apartment market has finally hit a pause, with rent growth slipping into negative territory in the third quarter of 2025. According to RealPage data, effective asking rents fell 0.3% between July and September, the first rent cut between July and September since 2009. In the year-ending third quarter, rents slipped 0.1%. The slowdown reflects a cooling economy.About 637,000 market-rate apartments were absorbed in the year-ending third quarter of 2025. While still healthy by long-term standards, it is a clear step down from the record nearly 784,900 units absorbed in the year-ending second quarter of 2025. “Sluggish new lease activity” is the culprit, said RealPage Chief Economist Carl Whitaker, pointing to weaker job growth and more cautious consumer behavior as key factors behind the shift amid an uncertain economic backdrop.While demand cooled, construction of roughly 474,800 units was completed nationwide over the past year, including 105,500 in the third quarter alone. That’s below last year’s peak but still well above normal supply levels. With so many new units hitting the market, landlords have had to compete harder to fill vacancies. Occupancy slipped to 95.4% in the quarter, down 30 basis points and ending five consecutive quarters of gains.To attract renters, concessions became more common, with 22% of properties offering discounts averaging 6.2%. Operators are increasingly prioritizing occupancy over pricing power, suggesting rent softness may persist until concessions taper off. Interestingly, resident retention rose year over year, as renters chose to stay put amid economic uncertainty.The rent cuts haven’t hit every region equally. Markets that built aggressively during the boom, especially across the South and West, are seeing the steepest declines. Rents dropped nearly 8% in Denver and Austin and around 5% in Phoenix and San Antonio, TX. Meanwhile, tourism-driven cities such as Las Vegas, Orlando, Nashville and San Diego are softening, too, as travelers spend less and local economies cool. In contrast, markets with lighter construction pipelines, such as the Midwest and Northeast, have held up better. Tech-heavy coastal hubs like San Francisco, New York and San Jose even saw modest rent growth, likely helped by return-to-office policies and limited new deliveries.Factors to Consider Ahead of AVB’s Q3 ResultsAvalonBay’s third-quarter 2025 results are likely to reflect the benefits of its high-quality apartment portfolio concentrated in premium U.S. markets. The company’s focus on metropolitan areas with decent job growth in high-wage sectors, high homeownership costs, and vibrant lifestyles is expected to continue to support stable rental income and healthy occupancy trends. AvalonBay’s strategy of targeting high-growth markets through development, acquisition and redevelopment of multifamily assets has consistently supported solid occupancy and premium pricing. Operational scale and technology use are likely to have aided margins and financial resilience.  However, higher same-store residential operating expenses are likely to have weighed on growth during the quarter. Also, interest expenses may have remained elevated.Projections for AVBIn a mid-quarter operating update, AvalonBay Communities provided a constructive update, noting that same-store residential revenue growth for July and August 2025 was in line with expectations set when it published its current outlook. We project economic occupancy of 96.3% in the quarter, up 10 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 2.2% year over year. Further, we expect interest expenses to rise 13.8% year over year in the third quarter. The Zacks Consensus Estimate of $772.14 million for third-quarter revenues suggests a 5.2% year-over-year increase. For the third quarter of 2025, AvalonBay expects core FFO per share in the range of $2.75-$2.85. Before the third-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 $2.81 over the past two months. However, it suggests year-over-year growth of 2.6%.Here Is What Our Quantitative Model Predicts for AVB:Our proven model does not conclusively predict 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 not the case here.AvalonBay currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of +1.29%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Stocks That Warrant a LookHere are two stocks from the residential REIT sector — American Homes 4 Rent AMH and Essex Property Trust, Inc. ESS — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.American Homes 4 Rent, scheduled to report quarterly numbers on Oct. 29, has an Earnings ESP of +1.44% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.Essex Property Trust is slated to report quarterly numbers on Oct. 29. ESS has an Earnings ESP of +0.45% 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.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. 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(ESS): 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