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Essex Property (ESS) Q4 FFO and Revenues Miss Estimates
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Residential real estate investment trust (“REIT”), Essex Property Trust Inc. (ESS - Free Report) failed to retain its winning streak alive in fourth-quarter 2016 as the company’s core funds from operations (“FFO”) per share of $2.81 for the quarter, missed the Zacks Consensus Estimate by a penny. However, core FFO per share improved 6.8% from the year-ago quarter figure of $2.63.
Total revenue of $329.0 million in the quarter also missed the Zacks Consensus Estimate of $330 million, but was up 5.9% year over year.
For full-year 2016, Essex’s core FFO per share was $11.04, which reflected 12.4% growth from the year-ago tally of $9.82. Total revenues for the year came in at nearly $1.3 billion, up 8.3% year over year.
Quarter in Detail
During the quarter, Essex Property’s same-property gross revenues grew 5.8% from the prior-year quarter, while same- property NOI improved 7.1% year over year. Financial occupancies of 96.7% expanded 20 basis points (bps) sequentially and 70 bps year over year.
During the quarter, the company acquired two communities for a total contract price of $185.0 million, while it sold two communities for a total contract price of $50.3 million.
Essex Property exited fourth-quarter 2016 with cash and cash equivalents, including restricted, of $170.3 million, up from $123.1 million at the end 2015. As of Jan 30, 2017, the company had $935 million in undrawn capacity on its unsecured credit facilities.
Outlook
Essex Property provided its guidance for 2017. The company projects core FFO per share in the range of $11.48–$11.88. The Zacks Consensus Estimate is currently pegged at $11.78.
The company estimates same-property gross revenue growth in the 2.75–3.75% band and operating expense in the range of 2.5–3.5%. Same-property NOI is guided in the range of 2.5–4.25%.
For first-quarter 2017, the company foresees core FFO per share in the $2.80–$2.90 range. The Zacks Consensus Estimate is currently pegged at $2.90.
Conclusion
With a strong property base and solid balance sheet, Essex is likely to leverage on favorable demographic trends in its markets. Further, its short-term leases offer scope to adjust to rate hikes. However, there have been consistent apartment deliveries and a slowdown in employment trends nationwide, and in a number of west coast submarkets particularly. This is anticipated to continue and will moderate pricing power amid aggressive rental concessions provided at the newly developed communities.
Among other residential REITs, UDR Inc. (UDR - Free Report) came up with a better-than-expected performance for fourth-quarter 2016 supported by growth in revenues. The company reported FFO as adjusted per share of 46 cents, beating the Zacks Consensus Estimate by a penny. The figure was also higher than the prior-year quarter tally of 42 cents. (Read more: UDR Beats on Q4 FFO Estimates; Revenue Up Y/Y)
Equity Residential (EQR - Free Report) came up with fourth-quarter 2016 normalized FFO per share of 79 cents, in line with the Zacks Consensus Estimate. However, it was down from the 93 cents reported in the year-ago quarter. (Read more: Equity Residential Meets Q4 Estimates; Revenues Top)
Further, AvalonBay Communities, Inc.’s (AVB - Free Report) fourth-quarter 2016 core funds from operations (“FFO”) per share of $2.12 exceeded the Zacks Consensus Estimate of $2.10. The figure also grew 6.5% from the year-ago number of $1.99. In addition, the company declared a 5.2% hike in its quarterly dividend. (Read more: AvalonBay Q4 FFO Beats Estimates, Dividend Raised)
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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Essex Property (ESS) Q4 FFO and Revenues Miss Estimates
Residential real estate investment trust (“REIT”), Essex Property Trust Inc. (ESS - Free Report) failed to retain its winning streak alive in fourth-quarter 2016 as the company’s core funds from operations (“FFO”) per share of $2.81 for the quarter, missed the Zacks Consensus Estimate by a penny. However, core FFO per share improved 6.8% from the year-ago quarter figure of $2.63.
Total revenue of $329.0 million in the quarter also missed the Zacks Consensus Estimate of $330 million, but was up 5.9% year over year.
For full-year 2016, Essex’s core FFO per share was $11.04, which reflected 12.4% growth from the year-ago tally of $9.82. Total revenues for the year came in at nearly $1.3 billion, up 8.3% year over year.
Quarter in Detail
During the quarter, Essex Property’s same-property gross revenues grew 5.8% from the prior-year quarter, while same- property NOI improved 7.1% year over year. Financial occupancies of 96.7% expanded 20 basis points (bps) sequentially and 70 bps year over year.
During the quarter, the company acquired two communities for a total contract price of $185.0 million, while it sold two communities for a total contract price of $50.3 million.
Essex Property exited fourth-quarter 2016 with cash and cash equivalents, including restricted, of $170.3 million, up from $123.1 million at the end 2015. As of Jan 30, 2017, the company had $935 million in undrawn capacity on its unsecured credit facilities.
Outlook
Essex Property provided its guidance for 2017. The company projects core FFO per share in the range of $11.48–$11.88. The Zacks Consensus Estimate is currently pegged at $11.78.
The company estimates same-property gross revenue growth in the 2.75–3.75% band and operating expense in the range of 2.5–3.5%. Same-property NOI is guided in the range of 2.5–4.25%.
For first-quarter 2017, the company foresees core FFO per share in the $2.80–$2.90 range. The Zacks Consensus Estimate is currently pegged at $2.90.
Conclusion
With a strong property base and solid balance sheet, Essex is likely to leverage on favorable demographic trends in its markets. Further, its short-term leases offer scope to adjust to rate hikes. However, there have been consistent apartment deliveries and a slowdown in employment trends nationwide, and in a number of west coast submarkets particularly. This is anticipated to continue and will moderate pricing power amid aggressive rental concessions provided at the newly developed communities.
Essex Property currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Essex Property Trust, Inc. Price, Consensus and EPS Surprise
Essex Property Trust, Inc. Price, Consensus and EPS Surprise | Essex Property Trust, Inc. Quote
Among other residential REITs, UDR Inc. (UDR - Free Report) came up with a better-than-expected performance for fourth-quarter 2016 supported by growth in revenues. The company reported FFO as adjusted per share of 46 cents, beating the Zacks Consensus Estimate by a penny. The figure was also higher than the prior-year quarter tally of 42 cents. (Read more: UDR Beats on Q4 FFO Estimates; Revenue Up Y/Y)
Equity Residential (EQR - Free Report) came up with fourth-quarter 2016 normalized FFO per share of 79 cents, in line with the Zacks Consensus Estimate. However, it was down from the 93 cents reported in the year-ago quarter. (Read more: Equity Residential Meets Q4 Estimates; Revenues Top)
Further, AvalonBay Communities, Inc.’s (AVB - Free Report) fourth-quarter 2016 core funds from operations (“FFO”) per share of $2.12 exceeded the Zacks Consensus Estimate of $2.10. The figure also grew 6.5% from the year-ago number of $1.99. In addition, the company declared a 5.2% hike in its quarterly dividend. (Read more: AvalonBay Q4 FFO Beats Estimates, Dividend Raised)
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>