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Essex Property Trust (ESS) Up 4% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Essex Property Trust (ESS). Shares have added about 4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Essex Property Trust due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Essex Property Beats Q1 FFO Estimates, Raises Outlook

Essex Property Trust    reported first-quarter 2019 core FFO per share of $3.23, surpassing the Zacks Consensus Estimate of $3.19. Core FFO per share improved 4.5% from the year-ago quarter figure of $3.09.

Results reflect growth in same-property NOI. The operating fundamentals in the West Coast market have been healthy, and the Northern California and Seattle regions are witnessing solid demand, backed by the technology sector. Management remains confident of achieving roughly 3% rent growth in its markets this year.

Total revenues of $356.2 million in the reported quarter grew 2.6% year over year. The figure also outpaced the Zacks Consensus Estimate of $353.5 million.

Quarter in Detail

During the reported quarter, Essex Property’s same-property gross revenues grew 3.1% from the prior-year quarter, while same-property NOI improved 2.8% year over year. Financial occupancies of 96.9% expanded 10 basis points (bps) sequentially but edged down 20 bps year over year.

Essex Property exited first-quarter 2019 with cash and cash equivalents, including restricted cash, of $124.1 million, down from $151.4 million recorded at the end of 2018. As of Apr 22, 2019, the company had around $1.1 billion in undrawn capacity on its unsecured credit facilities.

Apart from these, the company did not issue any shares of common stock under the equity distribution program in the first quarter.

Essex Property repurchased 234,061 shares of its common stock aggregating $57.0 million (including commissions), the average price being $243.48 per share. Notably, the company’s stock repurchase plan has been replaced, increasing the buyback authorization to $250 million and as of Mar 31, 2019, this entire authorization was remaining under its stock repurchase plan.

Outlook

For 2019, the company has raised its core FFO per share projections by 5 cents at the mid-point to $12.90-$13.25. The company has reaffirmed its full-year guidance for same-property revenues, expenses and NOI growth. Particularly, the company expects same-property revenue growth of 2.5-3.5% and same-property NOI growth of 2.1-3.9%.

For second-quarter 2019, the company projects core FFO per share at $3.17-$3.27.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Essex Property Trust has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Essex Property Trust has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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