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Will High Supply Impact Essex Property (ESS) Q2 Earnings?
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Essex Property Trust, Inc. (ESS - Free Report) is scheduled to report second-quarter 2018 results on Aug 1, after the market closes. The company’s results will likely reflect year-over-year growth in funds from operations (FFO) per share and revenues.
In the last reported quarter, this San Mateo, CA-based residential real estate investment trust (REIT) delivered a positive surprise of 1.31%, in terms of FFO per share. Results reflected growth in net operating income (NOI) and high occupancy levels.
Over the trailing four quarters, the company beat the Zacks Consensus Estimate in three occasions and met in the other, the average beat being 0.93%. This is depicted in the graph below:
Let’s see how things have shaped up for this announcement.
Factors at Play
Essex Property enjoys a sturdy property base and strong management team. In addition, the company’s focus on acquisition and development of West Coast properties is predicted to have offered ample scope to enhance its top line in the to-be-reported quarter. Notably, the West Coast is a hub of innovation and technology companies. While wages are expected to rise amid growth in these companies, we anticipate apartments in the area to have registered decent demand and rent growth in the April-June quarter. Particularly, increasing consumer confidence, driven by job growth, higher wages and a healthier balance sheet promises bright prospects for this residential REIT.
This apart, demographic growth continues to be strong in the young-adult age cohort, which has a higher propensity to rent. In fact, a significant change in lifestyle has taken place and life-cycle events are getting delayed. This is leading to an extension of the average age of first-time homeownership. This age cohort also experiences a considerable part of net job growth and provides a significant source of pent-up demand. Essex Property maintains a solid balance sheet and enjoys financial flexibility which is likely to have aided the company’s operational performance in the quarter.
Amid these, the Zacks Consensus Estimate for second-quarter revenues is pegged at $348.6 million, marking an expected increase of 2.8% year over year. Also, for the second quarter, the company estimates core FFO per share of $3.00-$3.10. The Zacks Consensus Estimate for the same has been revised marginally upward in the last 30 days and is currently pegged at $3.10. It reflects 4.4% growth from the prior-year quarter.
However, the latest report from the real estate technology and analytics firm, RealPage, Inc. (RP), suggests that rent growth in the U.S. apartment market is slowing down. In fact, with several markets witnessing flat rents, U.S. apartment rents increased at an annual pace of just 2.3%, as of mid-2018 — denoting the slowest pace in eight years. While a mid-2018 occupancy level of 95.0% is still healthy, the deceleration in rent growth suggests that a competitive leasing environment is fast building up amid elevated supply, and curbing landlords’ pricing power.
For Essex Property too, apartment deliveries are expected to have remained elevated in a number of its markets. This high supply is a concern because it curtails landlords’ ability to command more rent and results in lesser absorption. Such an environment is likely to have led to high rental concessions and moderate pricing power of the company.
Earnings Whispers
Our proven model does not conclusively show that Essex Property will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP is -0.29%.
Zacks Rank: Essex Property has a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Chatham Lodging Trust (CLDT - Free Report) , scheduled to release quarterly figures on Aug 1, has an Earnings ESP of +1.14% and a Zacks Rank #3.
HCP, Inc. (HCP - Free Report) , set to report Q2 numbers on Aug 2, has an Earnings ESP of +0.60% and carries a Zacks Rank of 3.
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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Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Will High Supply Impact Essex Property (ESS) Q2 Earnings?
Essex Property Trust, Inc. (ESS - Free Report) is scheduled to report second-quarter 2018 results on Aug 1, after the market closes. The company’s results will likely reflect year-over-year growth in funds from operations (FFO) per share and revenues.
In the last reported quarter, this San Mateo, CA-based residential real estate investment trust (REIT) delivered a positive surprise of 1.31%, in terms of FFO per share. Results reflected growth in net operating income (NOI) and high occupancy levels.
Over the trailing four quarters, the company beat the Zacks Consensus Estimate in three occasions and met in the other, the average beat being 0.93%. This is depicted in the graph below:
Essex Property Trust, Inc. Price and EPS Surprise
Essex Property Trust, Inc. Price and EPS Surprise | Essex Property Trust, Inc. Quote
Let’s see how things have shaped up for this announcement.
Factors at Play
Essex Property enjoys a sturdy property base and strong management team. In addition, the company’s focus on acquisition and development of West Coast properties is predicted to have offered ample scope to enhance its top line in the to-be-reported quarter. Notably, the West Coast is a hub of innovation and technology companies. While wages are expected to rise amid growth in these companies, we anticipate apartments in the area to have registered decent demand and rent growth in the April-June quarter. Particularly, increasing consumer confidence, driven by job growth, higher wages and a healthier balance sheet promises bright prospects for this residential REIT.
This apart, demographic growth continues to be strong in the young-adult age cohort, which has a higher propensity to rent. In fact, a significant change in lifestyle has taken place and life-cycle events are getting delayed. This is leading to an extension of the average age of first-time homeownership. This age cohort also experiences a considerable part of net job growth and provides a significant source of pent-up demand. Essex Property maintains a solid balance sheet and enjoys financial flexibility which is likely to have aided the company’s operational performance in the quarter.
Amid these, the Zacks Consensus Estimate for second-quarter revenues is pegged at $348.6 million, marking an expected increase of 2.8% year over year. Also, for the second quarter, the company estimates core FFO per share of $3.00-$3.10. The Zacks Consensus Estimate for the same has been revised marginally upward in the last 30 days and is currently pegged at $3.10. It reflects 4.4% growth from the prior-year quarter.
However, the latest report from the real estate technology and analytics firm, RealPage, Inc. (RP), suggests that rent growth in the U.S. apartment market is slowing down. In fact, with several markets witnessing flat rents, U.S. apartment rents increased at an annual pace of just 2.3%, as of mid-2018 — denoting the slowest pace in eight years. While a mid-2018 occupancy level of 95.0% is still healthy, the deceleration in rent growth suggests that a competitive leasing environment is fast building up amid elevated supply, and curbing landlords’ pricing power.
For Essex Property too, apartment deliveries are expected to have remained elevated in a number of its markets. This high supply is a concern because it curtails landlords’ ability to command more rent and results in lesser absorption. Such an environment is likely to have led to high rental concessions and moderate pricing power of the company.
Earnings Whispers
Our proven model does not conclusively show that Essex Property will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP is -0.29%.
Zacks Rank: Essex Property has a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Extra Space Storage Inc. (EXR - Free Report) , slated to release June-end quarter results on Jul 31, has an Earnings ESP of +0.80% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chatham Lodging Trust (CLDT - Free Report) , scheduled to release quarterly figures on Aug 1, has an Earnings ESP of +1.14% and a Zacks Rank #3.
HCP, Inc. (HCP - Free Report) , set to report Q2 numbers on Aug 2, has an Earnings ESP of +0.60% and carries a Zacks Rank of 3.
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.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>