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Where AvalonBay Stands after Its 2Q17 Earnings Release

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Second quarter backed by rent growth

AvalonBay Communities (AVB) reported core FFO (funds from operations) of $2.09 per share, in line with Wall Street estimates, and its adjusted FFO rose 3% from 2Q16. Higher core FFO reflect higher net operating income from operating communities owned by the company. Core FFO reported during the quarter were within management’s guidance of $2.07–$2.13 per share.

The company’s EPS (earnings per share) of $1.20 surpassed estimates by 11%. However, results fell 16.7% from a year prior, mainly due to higher depreciation and lower profit from properties owned by joint ventures. The company’s reported EPS missed management’s estimate of $1.50–$1.56.

AvalonBay’s total revenue of $530.5 million marginally surpassed Wall Street’s estimate by 0.3%, and was a 6% rise from the year prior. Upbeat top-line growth reflected growth in development communities and stabilized operating communities.

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Third-quarter guidance

AvalonBay issued its third-quarter guidance during its earnings conference call. For the third quarter, the company expects to report EPS of $2.01–$2.07 and core FFO of $2.14–$2.20. Peers UDR (UDR), Essex Property Trust (ESS), and Equity Residential (EQR) reported FFO of $0.45, $2.97, and $0.77, respectively.

The SPDR Dow Jones REIT ETF (RWR), of which the aforementioned stocks form 13%, has a 95.6% exposure to REITs. The varied portfolio offers a cushion to investors.

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