Essex Property Trust’s Strong Year Continues Despite Recent Downgrades
Essex Property Trust, Inc. (ESS), a prominent REIT based in San Mateo, California, focuses on acquiring, developing, redeveloping, and managing multifamily residential properties in markets where supply is limited. The company boasts a market capitalization of $19.6 billion and is a leading player in the West Coast multifamily housing sector, currently managing over 250 apartment communities and more than 62,000 homes.
Solid Performance Amidst Challenges
Over the past year, Essex has significantly outperformed the broader market. Over this period, its stock price increased by 44.3%, exceeding the S&P 500 Index’s ($SPX) gain of 32.1%. However, for 2024, Essex’s stock has seen a 24.9% rise, slightly behind SPX’s 26.2% returns year-to-date.
When compared to the Residential REIT ETF’s (HAUS) recent performance, Essex continues to stand out as well, outperforming HAUS’s 21.1% gains in 2024 and 33.7% returns over the last year.
Recent Earnings Release and Market Reactions
Following the release of its Q3 earnings on the evening of October 29, ESS stock experienced a drop of 1.5% and continued to decline in the following two trading sessions. The stock has recently been downgraded to a “Hold” rating by Raymond James and Bank of America Corporation (BAC), raising investor concerns. The company’s exposure to the Bay Area market, where rent growth is slowing and future prospects appear uncertain, has added to the worries surrounding its recent performance.
Despite this, Essex’s financial results remain strong. In Q3, the company recorded a revenue growth of 7.5% year-over-year, totaling $450.7 million. Additionally, its core funds from operations (FFO) per share increased by 3.4% year-over-year, reaching $3.91, which was 77 basis points above what analysts had predicted.
Future Expectations and Analyst Opinions
For the current fiscal year ending in December, analysts project that ESS will report a 3.5% year-over-year growth in core FFO per share, bringing the total to $15.56. The company has consistently exceeded analysts’ FFO estimates in each of the past four quarters, demonstrating its reliability.
Currently, ESS carries a consensus “Hold” rating. Among the 26 analysts evaluating the stock, five endorse a “Strong Buy,” one a “Moderate Buy,” 19 suggest “Hold,” and one recommends a “Strong Sell.”
This current rating landscape reflects a slight shift from two months ago when six analysts had issued “Strong Buy” recommendations, with two suggesting “Moderate Buy” and two advising “Strong Sell.” On September 16, Evercore ISI Group analyst Steve Sakwa reaffirmed an “In-Line” rating while raising the price target to $287.
As of this publication, ESS is trading above its mean price target of $305.83. With the highest target set at $370, there is a suggested potential upside of 19.5% from the current price levels.
On the date of publication, Aditya Sarawgi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
