AvalonBay Earnings: Occupancy and Rental Rates for New Tenants Improving, Leading to Guidance Raise

AvalonBay Communities' first-quarter results were slightly better than anticipated, leading us to reaffirm our $213 fair value estimate for the no-moat company. Same-store occupancy improved 30 basis points sequentially to 95.9%, better than our expectations of flat growth. Average rental rates improved 4.4% year over year, slightly better than our estimate of 3.9% growth, leading to same-store revenue growth of 4.2% in the first quarter. Same-store operating expenses were up a little higher at 5.2% in the quarter, so same-store net operating income growth was 3.7%, better than our 2.3% estimate. AvalonBay reported core funds from operations of $2.70 per share in the first quarter, slightly better than our $2.68 estimate and 5.1% higher than the $2.57 figure reported in the first quarter of 2023.