Despite high chances of a Fed lift-off next month, we believe that adding Essex Property Trust, Inc. ESS to your investment portfolio is a good idea now. Notably, shares of this Palo Alto, CA-based residential real estate investment trust (REIT) gained over 15% year to date, and the stock continues to reflect strength in several areas.
5 Reasons Why Essex Property is an Attractive Pick
West Coast Exposure: Essex Property enjoys a solid property base and a strong management team. Importantly, its merger with BRE Properties in 2014 led to the creation of a premium West Coast pure-play multifamily REIT. Substantial exposure in the West Coast market offers it ample scope to boost its top line as the region experiences solid growth in jobs and personal income, along with a comparatively lower housing supply, which should drive rents and occupancies.
Sales Growth: Essex Property boasts of five-year historical sales growth of 24.29%. Moreover, its projected sales growth (F1/F0) of 22.34%, as against the industry average growth rate of 9.20%, promises continued top-line growth.
Earnings per Share: Essex Property reported an earnings surprise of 1.63% in the last reported quarter. In each the trailing four quarters, the company has delivered a positive surprise with an average beat of 2.06%.
Its historical EPS growth (3–5 years) of 14.46% is well above the industry average of 9.98%. Moreover, the earnings momentum is expected to continue in the near term as reflected by the company’s projected EPS growth (F1/F0) of 14.1%, compared to the industry average rate of 9.72%. This reflects strong prospects for the company.
Cash Flow Growth: Essex Property enjoys decent cash flow growth, which is much needed to drive business, going forward. At present, its cash flow growth stands at an impressive 53.65%, which is not only ahead of many of its peers but also above the industry average of 41.62%.
Earnings Estimate Revisions: Analysts have been raising their estimates for Essex lately. In fact, in the past 30 days, the Zacks Consensus Estimate for 2015 moved north 8 cents to $9.74, while that for 2016 climbed 9 cents to $10.84.
In Conclusion
Considering these positive traits, we believe that investing in Essex Property right now should not disappoint you. The company currently has a Zacks Rank #2 (Buy). Moreover, reflecting its solid growth potential, the stock has a Zacks Growth Style Score of ‘B’. According to our style score system, a stock with favorable Zacks Rank and Zacks Growth Style Score of ‘A’ (or ‘B’) are highly desirable.
Other Stocks to Consider
Other top-ranked stocks in the residential REIT space include Apartment Investment and Management Company AIV, Avalonbay Communities Inc. AVB and UDR, Inc. UDR. All three stocks carry the same Zacks Rank as Essex Property.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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