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Why Is Essex Property Trust (ESS) Down 3.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Essex Property Trust (ESS - Free Report) . Shares have lost about 3.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Essex Property Trust due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Essex Property Q3 FFO & Revenues Rise Y/Y, Outlook Up

Essex Property Trust reported third-quarter 2019 core FFO per share of $3.35. Though the figure improved 6.3% from the year-ago quarter tally of $3.15, it narrowly missed the Zacks Consensus Estimate of $3.36.

Results of this residential REIT reflect improved net operating income from its communities, while occupancy level moderated sequentially and year over year.

Total revenues of $366.9 million were up 4.6% year over year in the reported quarter. The figure, in addition, outpaced the Zacks Consensus Estimate of $365.5 million. The company has also increased its full-year core FFO per share guidance mid-point for the third time this year.

According to management, the West Coast markets remain supply constrained, and keep on adding jobs and growing incomes. This, in turn, is expected to help maintain market rent growth close to their long-term averages. Moreover, management noted that decrease in the cost of capital since January has helped the company exceed the high-end of its acquisition targets and Essex Property is seeking out accretive opportunities.

Quarter in Detail

During the third quarter, Essex Property’s same-property gross revenues grew 3.1% from the prior-year quarter. Same-property NOI too improved 3.1% year over year. However, financial occupancies of 96% shrunk 60 basis points (bps) sequentially and 40 bps year over year.

Essex Property exited the third quarter with cash and cash equivalents, including restricted cash, of $91.7 million, down from the $151.4 million recorded at the end of 2018. As of Oct 22, the company had $1 billion in undrawn capacity on its unsecured credit facilities.

These apart, the company issued 228,271 shares of its common stock at an average price per share of $321.56, generating $73.4 million in gross proceeds, through its equity distribution program.

Moreover, during the reported quarter, Essex Property acquired three apartment communities for a total contract price of $414.7 million.

Outlook

For 2019, the company raised its core FFO per share projections by 5 cents at the mid-point to $13.28-$13.38. The full-year outlook is backed by same-property gross revenue growth guidance of 3.1-3.4%, and NOI increase of 3.4-3.9%

For fourth-quarter 2019, the company projects core FFO per share at $3.36-$3.46.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Essex Property Trust has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Essex Property Trust has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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