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Essex Property Trust (ESS) Raises 2022 Guidance, Stock Down
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Essex Property Trust, Inc. (ESS - Free Report) has raised the second-quarter and full-year 2022 guidance for core funds from operations (FFO) per share. It also upped the full-year outlook for same-property revenues and net operating income (NOI) on improving market conditions.
However, reflecting broader market concerns, shares of this residential real estate investment trust (REIT) lost 2.60% in Monday’s trading session.
ESS raised its second-quarter core FFO per share guidance to $3.55-$3.61 from the previously guided range of $3.43 to $3.55, increasing the midpoint by 9 cents to $3.58. This is higher than the Zacks Consensus Estimate, currently pegged at $3.50.
For full-year 2022, Essex Property estimates core FFO per share in the range of $14.00-$14.32, up from the prior outlook of $13.77-$14.13, indicating a rise of 21 cents at the midpoint to $14.16. This is also above the Zacks Consensus Estimate of $14.06.
ESS projects same-property revenues on a cash basis to grow in the range of 9.1-10.1% for 2022, up from 8.1-9.1% projected earlier. While operating expense remains unchanged in the band of 3.5-4.5%, NOI growth projections have been revised upward from 9.7-11.6% to 11.1-13.1%.
Essex Property has a sturdy property base in the West Coast market and enjoys healthy balance-sheet strength. The demand for rental units is rising as technology companies are returning to office and homeownership is becoming costlier due to higher interest rates. Moreover, with two of the largest Life Science clusters located in California, it acts as a key employment driver in the Bay Area and San Diego regions. A combination of these factors is driving rental demand for Essex Property. Per the second-quarter operating update, the preliminary April-May year-over-year new lease spreads recorded 21.4% growth.
In addition, as a result of better operating fundamentals, Essex Property has raised its full-year 2022 MSA level economic rent forecast to 11.1%, a 340 basis point increase from the prior projection of 7.7%.
The preliminary April-May 2022 same-property revenue growth is better than expected due to higher net effective rent growth and lower net delinquencies. The same increased 12.5% year over year from 6.5% reported in the first quarter.
Essex Property’s preliminary April-May 2022 update reveals that same-property cash delinquencies as a percentage of scheduled rent were 0.1% compared with the first quarter’s 2.2%. Financial occupancy was 95.9% in April-May compared with 96.3% in the first quarter.
Nevertheless, the outmigration trend of population and business is raising concerns for the company. A flexible working environment has resulted in a shift in renter demand away from higher cost and urban/infill markets. Moreover, oversupply in its urban markets adds to the company’s woes.
Some better-ranked stocks in the REIT sector are MidAmerica Apartment Communities (MAA - Free Report) , Independence Realty Trust (IRT - Free Report) and BRT Apartments (BRT - Free Report) .
The Zacks Consensus Estimate for MidAmerica Apartment Communities’ 2022 FFO per share has moved 1.2% upward in the past month to $8.17. MAA presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Independence Realty Trust’s current-year FFO per share has moved roughly 1% northward in the past month to $1.05. IRT also carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for BRT Apartments’ ongoing year’s FFO per share has been raised 18.5% over the past month to $1.54. BRT carries a Zacks Rank #1, currently.
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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Essex Property Trust (ESS) Raises 2022 Guidance, Stock Down
Essex Property Trust, Inc. (ESS - Free Report) has raised the second-quarter and full-year 2022 guidance for core funds from operations (FFO) per share. It also upped the full-year outlook for same-property revenues and net operating income (NOI) on improving market conditions.
However, reflecting broader market concerns, shares of this residential real estate investment trust (REIT) lost 2.60% in Monday’s trading session.
ESS raised its second-quarter core FFO per share guidance to $3.55-$3.61 from the previously guided range of $3.43 to $3.55, increasing the midpoint by 9 cents to $3.58. This is higher than the Zacks Consensus Estimate, currently pegged at $3.50.
For full-year 2022, Essex Property estimates core FFO per share in the range of $14.00-$14.32, up from the prior outlook of $13.77-$14.13, indicating a rise of 21 cents at the midpoint to $14.16. This is also above the Zacks Consensus Estimate of $14.06.
ESS projects same-property revenues on a cash basis to grow in the range of 9.1-10.1% for 2022, up from 8.1-9.1% projected earlier. While operating expense remains unchanged in the band of 3.5-4.5%, NOI growth projections have been revised upward from 9.7-11.6% to 11.1-13.1%.
Essex Property has a sturdy property base in the West Coast market and enjoys healthy balance-sheet strength. The demand for rental units is rising as technology companies are returning to office and homeownership is becoming costlier due to higher interest rates. Moreover, with two of the largest Life Science clusters located in California, it acts as a key employment driver in the Bay Area and San Diego regions. A combination of these factors is driving rental demand for Essex Property. Per the second-quarter operating update, the preliminary April-May year-over-year new lease spreads recorded 21.4% growth.
In addition, as a result of better operating fundamentals, Essex Property has raised its full-year 2022 MSA level economic rent forecast to 11.1%, a 340 basis point increase from the prior projection of 7.7%.
The preliminary April-May 2022 same-property revenue growth is better than expected due to higher net effective rent growth and lower net delinquencies. The same increased 12.5% year over year from 6.5% reported in the first quarter.
Essex Property’s preliminary April-May 2022 update reveals that same-property cash delinquencies as a percentage of scheduled rent were 0.1% compared with the first quarter’s 2.2%. Financial occupancy was 95.9% in April-May compared with 96.3% in the first quarter.
Nevertheless, the outmigration trend of population and business is raising concerns for the company. A flexible working environment has resulted in a shift in renter demand away from higher cost and urban/infill markets. Moreover, oversupply in its urban markets adds to the company’s woes.
Shares of this Zacks Rank #3 (Hold) company have declined 17.9% compared with the industry's fall of 10.3% in the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the REIT sector are MidAmerica Apartment Communities (MAA - Free Report) , Independence Realty Trust (IRT - Free Report) and BRT Apartments (BRT - Free Report) .
The Zacks Consensus Estimate for MidAmerica Apartment Communities’ 2022 FFO per share has moved 1.2% upward in the past month to $8.17. MAA presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Independence Realty Trust’s current-year FFO per share has moved roughly 1% northward in the past month to $1.05. IRT also carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for BRT Apartments’ ongoing year’s FFO per share has been raised 18.5% over the past month to $1.54. BRT carries a Zacks Rank #1, currently.
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.