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Essex Property (ESS) Up 6.3% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Essex Property Trust, Inc.ESS . Shares have added about 6.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ESS due for a pullback? 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 Q4 FFO and Revenues Grow Y/Y

Essex Property delivered an in-line performance for fourth-quarter 2017. The company reported core FFO per share of $3.01 for the quarter, meeting the Zacks Consensus Estimate. Core FFO per share improved 7.1% from the year-ago quarter figure of $2.81.

Results reflect solid growth in NOI and high occupancy level.

Total revenues of $345.1 million in the quarter grew 4.9% year over year. However, the figure narrowly missed the Zacks Consensus Estimate of $346.5 million.

In 2018, management expects housing demand to surpass supply in coastal markets of California and Washington. This is likely to result in growth in market rent close to long-term averages. Specifically, West Coast is anticipated to outdo the nation both in terms of rent growth as well as job growth in the year.

For full-year 2017, core FFO per share came in at $11.91, 7.9% ahead of the prior-year tally of $11.04. This was backed by 5.4% year-over-year growth in total revenues to $1.4 billion.

Quarter in Detail

During the reported quarter, Essex Property's same-property gross revenues grew 3.0% from the prior-year quarter, while same-property NOI improved 3.4% year over year. Financial occupancies of 96.8% expanded 20 basis points (bps) year over year.

Further, the company sold two communities for a total contract price of $160.3 million during the quarter. On the other hand, the company acquired one community for a total contract price of $59.0 million.

Liquidity

Essex Property exited year-end 2017 with cash and cash equivalents, including restricted cash, of $61.1 million, down from $170.3 million at the end of 2016.

Notably, in January 2018, the company made an amendment to its unsecured line of credit facility, thereby enhancing the maximum amount available for borrowing from $1.0 billion to $1.2 billion as well as lengthening the maturity to December 2021. As of Feb 2, 2018, the company had around $891.0 million in undrawn capacity on its unsecured credit facilities.

During the fourth quarter, the company issued 33,571 shares of common stock at an average price of $261.19 through its equity distribution program for net proceeds of $8.7 million. For full-year 2017, the company issued 345,444 shares of common stock at an average price of $260.38. This helped generate net proceeds of $89.1 million.

Outlook

Essex Property provided its guidance for first-quarter and full-year 2018. For the full year, the company projects core FFO per share in the range of $12.24-$12.64. The full-year 2018 projection is backed by expectations for same-property revenue growth in the band of 2.0-3.0% and same-property NOI increase in the range of 1.6-3.4%.

For first-quarter 2018, the company projects core FFO per share in the $2.99-$3.09 band.

How Have Estimates Been Moving Since Then?

In the past month , investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower.

Essex Property Trust, Inc. Price and Consensus

Essex Property Trust, Inc. Price and Consensus | Essex Property Trust, Inc. Quote

VGM Scores

At this time, ESS has an average Growth Score of C, however its Momentum is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

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

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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