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Here's Why Essex Property (ESS) is an Apt Portfolio Choice
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Essex Property Trust (ESS - Free Report) is well-positioned to benefit from its sturdy property base and a strong management team. Its robust presence in the West Coast market provides it with ample opportunities to capitalize on the market recovery, thereby boosting its top line over the long term.
Moreover, with the easing of COVID-19-related regulations in the West Coast, the deadline to apply for rental relief in California passed as of Apr 1, 2022. The delays in government reimbursements had resulted in the highest delinquency since the onset of the pandemic. However, Essex Property is likely to witness higher rental growth now that the rental relief program is no longer available.
Apart from this, Essex property benefits from favorable demographic trends of the young adult age cohort, which has a higher propensity to rent.
To capitalize on tailwinds, Essex Property is also banking on its technology, scale and organizational capabilities to drive innovation and margin expansion in its portfolio. It is making steady progress on the technology front, and leasing agents are becoming more productive by leveraging these tools.
Essex Property maintains a healthy balance sheet and has ample financial flexibility. As of Apr 22, 2022, the company had $1.2 billion of liquidity through an undrawn capacity on its unsecured credit facilities and cash and marketable securities. Also, taking advantage of the low interest-rate environment prevalent in 2020, ESS refinanced part of its debt, reduced its weighted average interest rate and extended its maturity profile. Further, credit ratings of Baa1/Stable from Moody’s and a BBB+/Stable from both Fitch and S&P give it favorable access to the debt market.
Analysts seem bullish on this Zacks Rank #2 (Buy) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased marginally over the past month to $14.17.
However, health concerns of living in a dense environment and work-from-home flexibility have driven demand away from the costlier urban/infill markets to suburban markets.
A hike in interest rates might raise borrowing costs for the company, which would affect its ability to purchase or develop real estate. Its total consolidated debt (net) as of Mar 31, 2022, was approximately $6.04 billion. Moreover, the dividend payout might become less attractive than the yields on fixed income and money market accounts.
Shares of Essex Property have declined 22.8% in the past three months compared with the industry’s fall of 16.2%.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks in the REIT sector are MidAmerica Apartment Communities (MAA - Free Report) , Camden Property Trust (CPT - Free Report) and BRT Apartments (BRT - Free Report) .
The Zacks Consensus Estimate for MidAmerica Apartment Communities’ 2022 FFO per share has moved 1.9% upward in the past two months to $8.22. MAA presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Camden Property Trust’s current-year FFO per share has marginally moved northward in the past month to $6.52. CPT 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 two months to $1.54. BRT carries a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
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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Here's Why Essex Property (ESS) is an Apt Portfolio Choice
Essex Property Trust (ESS - Free Report) is well-positioned to benefit from its sturdy property base and a strong management team. Its robust presence in the West Coast market provides it with ample opportunities to capitalize on the market recovery, thereby boosting its top line over the long term.
Moreover, with the easing of COVID-19-related regulations in the West Coast, the deadline to apply for rental relief in California passed as of Apr 1, 2022. The delays in government reimbursements had resulted in the highest delinquency since the onset of the pandemic. However, Essex Property is likely to witness higher rental growth now that the rental relief program is no longer available.
Apart from this, Essex property benefits from favorable demographic trends of the young adult age cohort, which has a higher propensity to rent.
To capitalize on tailwinds, Essex Property is also banking on its technology, scale and organizational capabilities to drive innovation and margin expansion in its portfolio. It is making steady progress on the technology front, and leasing agents are becoming more productive by leveraging these tools.
Essex Property maintains a healthy balance sheet and has ample financial flexibility. As of Apr 22, 2022, the company had $1.2 billion of liquidity through an undrawn capacity on its unsecured credit facilities and cash and marketable securities. Also, taking advantage of the low interest-rate environment prevalent in 2020, ESS refinanced part of its debt, reduced its weighted average interest rate and extended its maturity profile. Further, credit ratings of Baa1/Stable from Moody’s and a BBB+/Stable from both Fitch and S&P give it favorable access to the debt market.
Analysts seem bullish on this Zacks Rank #2 (Buy) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased marginally over the past month to $14.17.
However, health concerns of living in a dense environment and work-from-home flexibility have driven demand away from the costlier urban/infill markets to suburban markets.
A hike in interest rates might raise borrowing costs for the company, which would affect its ability to purchase or develop real estate. Its total consolidated debt (net) as of Mar 31, 2022, was approximately $6.04 billion. Moreover, the dividend payout might become less attractive than the yields on fixed income and money market accounts.
Shares of Essex Property have declined 22.8% in the past three months compared with the industry’s fall of 16.2%.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks in the REIT sector are MidAmerica Apartment Communities (MAA - Free Report) , Camden Property Trust (CPT - Free Report) and BRT Apartments (BRT - Free Report) .
The Zacks Consensus Estimate for MidAmerica Apartment Communities’ 2022 FFO per share has moved 1.9% upward in the past two months to $8.22. MAA presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Camden Property Trust’s current-year FFO per share has marginally moved northward in the past month to $6.52. CPT 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 two months to $1.54. BRT carries a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
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.