What's in Store for Essex Property (ESS) in Q3 Earnings?
Essex Property Trust, Inc. ESS is scheduled to report third-quarter 2022 earnings on Oct 26 after the closing bell. The company’s results are likely to reflect year-over-year growth in revenues and 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 3.66% in terms of FFO per share. Results highlighted better-than-expected operating results and lower property taxes in Washington.
Over the trailing four quarters, Essex Property surpassed the Zacks Consensus Estimate on each occasion, the average surprise being 1.46%. 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
For the U.S. apartment market, demand remained healthy initially in the third quarter, though normal seasonality returned in September.
Essex Property too is likely to have benefited from this trend. It has a sturdy property base and substantial exposure to the West Coast market and banks on its technology, scale and organizational capabilities to drive innovation and margin expansion in the portfolio.
Particularly, the demand for rental units is rising as technology companies are returning to the office, and homeownership is becoming costlier due to higher interest rates. A combination of these factors is driving the rental demand for Essex Property.
In its September investor presentation, Essex Property noted that its preliminary July-August 2022 same-property revenue growth remained strong at 12.4% compared to a year ago. Preliminary July-August blended lease rates increased 10.3% compared to a year ago.
However, ESS noted that due to more difficult comparison periods in 2021, blended lease rates have decelerated compared to the first half of 2022.
Moreover, net delinquency in July-August is 0.6% of the scheduled rent, and gross delinquency showed a gradual improvement through August. The residential REIT also noted that although year-over-year rent spreads for the first half of 2022 were robust, these are expected to moderate in the second half of 2022 because of more challenging comparable rents in the year-ago second half.
The Zacks Consensus Estimate of $406.93 million for third-quarter revenues calls for a 12.14% increase year over year. The consensus estimate for same-property revenues is pegged at $380.3 million, up from $373.3 million in the prior quarter and $325.15 million in the year-ago period.
This residential REIT is also likely to have maintained a decent balance sheet and financial flexibility during the quarter under review.
For the third quarter of 2022, Essex Property earlier projected core FFO per share in the range of $3.60-$3.70.
Before the third-quarter earnings release, the company’s activities were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has remained unchanged at $3.68 in the past month. However, it suggests a year-over-year increase of 17.95%.
Here Is What Our Quantitative Model Predicts:
Essex Property does not have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Essex Property currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.22%. 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 UDR Inc. UDR — that 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, scheduled to report quarterly figures on Oct 26, has an Earnings ESP of +1.31% and a Zacks Rank of 3 currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UDR, slated to release third-quarter earnings on Oct 26, has an Earnings ESP of +0.57% and a Zacks Rank of 2 (Buy) at present.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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