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Essex Property (ESS) Tops Q4 FFO, Guides '23 Below Expectation

Essex Property Trust Inc. ESS reported fourth-quarter 2022 core funds from operations (FFO) per share of $3.77, beating the Zacks Consensus Estimate of $3.74. The figure also improved by 16% from the year-ago quarter.

Results reflect improving same-property net operating income (NOI) in the quarter. However, this residential REIT’s first-quarter and full-year 2023 core FFO per share projections were lower than expected.

Shares of ESS were down 1.44% in after-hours trading on the NYSE yesterday.

Total revenues of $415.2 million exceeded the Zacks Consensus Estimate of $411.6 million. Revenues were also up 11.7% year over year.

For the full-year 2022, the core FFO per share came in at $14.51, higher than the prior-year tally of $12.49 and also ahead of the Zacks Consensus Estimate of $14.49. This was backed by 11.5% growth in revenues to $1.61 billion.

Quarter in Detail

During the October-December period, Essex Property’s same-property revenues increased 10.5% from the prior-year period, and operating expenses rose 4.0% year over year. Consequently, same-property NOI increased 13.3% year over year. Results primarily reflect an increase in scheduled rents.

On a sequential basis, same-property revenues increased 0.8%. Meanwhile, expenses declined -1.5%, resulting in the NOI inching up 1.8%. Financial occupancies of 96.0% in the fourth quarter remained unchanged sequentially but contracted 10 basis points (bps) year over year.

During the reported quarter, Essex Property sold a community comprising 250 apartment homes in Anaheim, CA, for a total contract price of $160.0 million at a 4.3% disposition yield, recognizing a $94.4 million gain on the sale during the quarter.

Balance Sheet

Essex Property exited 2022 with cash and cash equivalents, including restricted cash, of $42.7 million, down from the $58.6 million recorded at the end of 2021. ESS had $1.3 billion in liquidity through the undrawn capacity on its unsecured credit facilities, cash and marketable securities as of Feb 6, 2023.

In the fourth quarter, Essex Property repurchased 149,209 shares of its common stock aggregating $31.8 million, including commissions. The average price was $212.95 per share. As of Feb 6, 2023, ESS had $384.9 million of purchase authority remaining under its stock repurchase plan.


For the first quarter of 2023, Essex Property projects core FFO per share in the range of $3.51-$3.63, with the midpoint being $3.57. The Zacks Consensus Estimate for the same is pegged at $3.73.

For the full-year 2023, the company projects the core FFO per share in the range of $14.53-$14.97, with the midpoint being $14.75. However, this is lower than the Zacks Consensus Estimate of $15.20.

The full-year guidance is based on projections for the same-property revenue growth of 3.25-4.75%, an operating expense increase of 4.50-5.50% and an NOI expansion of 2.30-4.90%.

Essex Property currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Essex Property Trust, Inc. Price, Consensus and EPS Surprise

Essex Property Trust, Inc. Price, Consensus and EPS Surprise
Essex Property Trust, Inc. Price, Consensus and EPS Surprise

Essex Property Trust, Inc. price-consensus-eps-surprise-chart | Essex Property Trust, Inc. Quote

Performance of Another Residential REIT

Mid-America Apartment Communities, Inc. MAA, commonly referred to as MAA, reported fourth-quarter 2022 core FFO per share of $2.32, surpassing the Zacks Consensus Estimate of $2.28. The reported number improved by 22.1% year over year.

Mid-America Apartment Communities’ quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. MAA issued its outlook for 2023.

Upcoming Releases

We now look forward to the earnings release of residential REITs — AvalonBay Communities, Inc. AVB and Equity Residential EQR. While AvalonBay Communities is slated to report quarterly results today after the closing bell, Equity Residential is scheduled to release its earnings results tomorrow.

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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