Yahoo Finance What's in Store for Essex Property (ESS) in Q1 Earnings?
Essex Property Trust, Inc. ESS is scheduled to report first-quarter 2023 results on Apr 27 after market close. The company’s quarterly results are likely to reflect year-over-year growth in revenues and core funds from operations (FFO) per share.
In the last reported quarter, this San Mateo, CA-based residential real estate investment trust (REIT) delivered a surprise of 0.80% in terms of core FFO per share. Results reflected improving same-property net operating income in the quarter.
Over the trailing four quarters, Essex Property surpassed the Zacks Consensus Estimate on each occasion, the average surprise being 1.41%. The graph below depicts the surprise history of the company:
Essex Property Trust, Inc. Price and EPS Surprise
Essex Property Trust, Inc. price-eps-surprise | Essex Property Trust, Inc. Quote
Let’s see how things have shaped up before this announcement.
Factors to Consider
According to first-quarter data from RealPage Market Analytics, the U.S. apartment market witnessed a rebound in net apartment demand, ending a streak of three consecutive quarters of negative absorption. The market added 19,243 net new renters in the quarter, signaling a return to positive territory. Occupancy rates continued to slide but at a much lesser degree than before, coming in at 94.7% in March, matching the pre-pandemic decade average.
Similarly, in March, same-store effective asking rents for new lease signers increased 0.3%, with effective asking rents up 3.9% year over year, marking the first time below 4% since April 2021. These trends suggest that somewhat normal seasonality is returning to the market after a three-year absence due to the pandemic.
Essex Property has a sturdy property base and substantial exposure to the West Coast market. ESS banks on its technology, scale and organizational capabilities to drive innovation and margin expansion in the portfolio.
In its March investor presentation, Essex Property noted that net effective rents have exhibited a continued sequential improvement since December 2022, consistent with historical
rent patterns and in sync with 2023 expectations. ESS’ preliminary Jan-Feb 2023 data reveals 7.8% growth in same-property revenues. Moreover, preliminary February 2023 data reveals blended rates of 2.9%, up from 2.2% in January.
The Zacks Consensus Estimate of $412.69 million for first-quarter revenues calls for an 8.1% increase year over year. The consensus estimate for same-property revenues is pegged at $378.25 million, up from $356.27 million in the year-ago period. Same-property financial occupancy is expected to slightly moderate to 95.9% from 96.0% in the prior quarter and 96.3% in the year-ago period.
However, the struggle to lure renters will persist as supply volumes are likely to have remained elevated in some of its markets. Such a competitive landscape limits the company’s ability to increase rents, restricting its growth momentum to some extent.
Also, a hike in the interest rate is a concern for Essex Property. Rising rates imply higher borrowing costs for the company, which would affect its ability to purchase or develop real estate.
For the first quarter of 2023, Essex Property earlier projected core FFO per share in the range of $3.51-$3.63, with the midpoint being $3.57.
Before the first-quarter earnings release, Essex Property’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised a cent south in the past month to $3.62. However, it suggests a year-over-year increase of 7.42%.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Essex Property 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.
Essex Property currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of -0.07%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the residential REIT sector — Mid-America Apartment Communities, Inc. MAA and Independence Realty Trust, Inc. IRT — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Mid-America Apartment Communities is slated to report quarterly numbers on Apr 26. MAA has an Earnings ESP of +1.19% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Independence Realty Trust, scheduled to report quarterly numbers on Apr 26, has an Earnings ESP of +4.82% and carries a Zacks Rank of 3.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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.
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Mid-America Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
Essex Property Trust, Inc. (ESS) : Free Stock Analysis Report
Independence Realty Trust, Inc. (IRT) : Free Stock Analysis Report
