San Mateo, California-based Essex Property Trust, Inc. (ESS) is a REIT acquires, develops, redevelops, and manages multifamily residential properties in supply-constrained markets. With a market cap of $19.6 billion, Essex operates as a leader in the West Coast multifamily housing market and holds ownership stakes in 250+ apartment communities and 62,000+ homes.
The real estate major has outpaced the broader market over the past year. Essex stock prices have surged 44.3% over the past year outpacing the S&P 500 Index’s ($SPX) 32.1% gains during the same time frame. However, Essex’s 24.9% gains in 2024 have slightly lagged behind SPX’s 26.2% returns on a YTD basis.
Narrowing the focus, Essex has also outperformed the Residential REIT ETF’s (HAUS) 21.1% gains in 2024 and 33.7% returns over the past 52 weeks.
ESS stock prices dropped 1.5% and maintained a negative momentum for the next two trading sessions after the release of its Q3 earnings on Oct. 29 evening. ESS stock has been recently downgraded by Raymond James and Bank of America Corporation (BAC) to a “Hold” rating which has raised concerns among investors. Moreover, Essex’s exposure to the Bay Area market, where rent growth has slowed down and future growth prospects look grim, added to the concern and led to the stock underperforming in the recent quarter.
However, the company’s financials have remained resilient as its Q3 revenues grew by a robust 7.5% year-over-year, reaching $450.7 million and its core funds from operations (FFO) per share increased 3.4% year-over-year to $3.91, which surpassed analysts’ consensus estimates by 77 basis points.
For the current fiscal year, ending in December, analysts expect ESS to report a 3.5% year-over-year growth in core FFO per share to $15.56. Moreover, the company has a robust earnings surprise history. It has surpassed analysts' FFO estimates in each of the past four quarters.
ESS stock has a consensus “Hold” rating overall. Among the 26 analysts covering the stock, five recommend “Strong Buy,” one advises “Moderate Buy,” 19 suggest “Hold,” and one advocates a “Strong Sell” rating.
This configuration is slightly less bullish than two months ago when six analysts recommended a “Strong Buy,” two suggested a “Moderate Buy,” and two advocated a “Strong Sell” rating.
On Sept. 16, Evercore ISI Group analyst Steve Sakwa maintained an “In-Line” rating while raising the price target to $287.
As of writing, ESS is trading above its mean price target of $305.83. Meanwhile, the Street-high target of $370 suggests a 19.5% upside potential from current price levels.
