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Shareholders might have noticed that Essex Property Trust, Inc. (NYSE:ESS) filed its quarterly result this time last week. The early response was not positive, with shares down 2.3% to US$291 in the past week. It looks like a credible result overall - although revenues of US$353m were what the analysts expected, Essex Property Trust surprised by delivering a (statutory) profit of US$2.59 per share, an impressive 168% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the consensus from Essex Property Trust's 15 analysts is for revenues of US$1.43b in 2021, which would reflect a small 5.7% decline in sales compared to the last year of performance. Statutory earnings per share are expected to plunge 37% to US$4.06 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$1.43b and earnings per share (EPS) of US$3.66 in 2021. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the nice increase in earnings per share expectations following these results.
The consensus price target was unchanged at US$288, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Essex Property Trust at US$320 per share, while the most bearish prices it at US$247. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 7.5% annualised revenue decline to the end of 2021. That is a notable change from historical growth of 4.7% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 6.7% per year. It's pretty clear that Essex Property Trust's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Essex Property Trust following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Essex Property Trust's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Essex Property Trust analysts - going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Essex Property Trust (at least 1 which makes us a bit uncomfortable) , and understanding these should be part of your investment process.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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