Essex Property to Report Q1 Earnings: Here's What to Expect

Essex Property Trust, Inc. ESS is scheduled to report its first-quarter 2025 results on April 29, after market close. The company’s quarterly results are likely to reflect year-over-year growth in revenues and core funds from operations (FFO) per share.

In the last reported quarter, this San Mateo, CA-based residential real estate investment trust (REIT) delivered a surprise of 0.51% in terms of core FFO per share. Results reflected favorable growth in same-property revenues and net operating income.

Over the trailing four quarters, Essex Property surpassed the Zacks Consensus Estimate on each occasion, the average surprise being 1.57%. The graph below depicts the surprise history of the company:

Essex Property Trust, Inc. Price and EPS Surprise

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

Let’s see how things have shaped up before this announcement.

U.S. Apartment Market in Q1

The first quarter of 2025 brought a wave of strong apartment demand, offering a lift to occupancy and rent growth as the supply surge begins to wane. Per RealPage data, from January through March 2025, more than 138,000 market-rate apartment units were absorbed nationally. This marks the highest first-quarter demand on record in the RealPage data set covering more than three decades. Combined with the robust demand seen over the last three quarters of 2024, annual absorption reached nearly 708,000 units, essentially matching the absorption from the early 2022 demand boom.

Demand in the year-ending first quarter of 2025 exceeded concurrent supply. Though nearly 577,000 units were delivered in the said period — just shy of last quarter’s record high of about 589,000 units — annual supply volume is forecasted to decline in the coming months, indicating that the construction cycle may have peaked.

Occupancy rose modestly to 95.2% in March, the highest reading since October 2022. While still within long-term norms, the uptick provides confidence that the rental market is not materially oversupplied. Rent growth has also regained traction. Effective rents rose 0.75% in March and 1.1% in the year-ending March 2025 — the highest 12-month reading since June 2023. All of the nation’s 50 largest apartment markets recorded rent increases on a monthly basis, signaling broad-based strength. The average effective rent was $1,848.

However, the recovery is regionally uneven. The Midwest and Rust Belt regions led annual rent gains, with cities like Kansas City, MO, Chicago, IL and Pittsburgh, PA, outperforming. In contrast, high-supply Sun Belt metros, such as Austin and Phoenix, continued to experience rent cuts. However, these markets saw monthly rent growth in March, suggesting momentum is returning ahead of the prime leasing season.

Factors to Consider Ahead of ESS’ Upcoming Results

Essex Property is poised to have benefited from its solid footprint on the West Coast, where tech-fueled job creation and elevated income levels sustain strong rental demand. Major employment centers in California, such as San Francisco and San Diego, draw a substantial renter population, with high homeownership costs further reinforcing the appeal of renting. By leveraging technology, scale and operational expertise, Essex is likely to have driven efficiency, reinforcing its portfolio in a region characterized by favorable demographics and decent economic conditions.

Essex Property also announced its transaction activity for the first quarter and April, reallocating its investments to newer communities in the Northern California submarkets with less supply and higher rental growth. It disposed of non-core assets in Southern California and divested the sale proceeds for the above acquisitions. (Read more: Essex Property Updates YTD Portfolio Reallocation Activity)

Nonetheless, Essex Property is likely to have continued to encounter headwinds in attracting renters during the first quarter, as elevated supply in certain markets put pressure on rent growth and occupancy levels. This heightened competition may have tempered the company's overall performance. Furthermore, persistently high interest rates remain a challenge, maintaining elevated borrowing costs.

Projections for ESS' Q1 Results

The Zacks Consensus Estimate of $458.76 million for first-quarter revenues calls for a 7.45% increase year over year. The consensus estimate for same-property revenues is pegged at $414.78 million, up from $409.82 million in the year-ago period. 

For the first quarter, we expect same-store property revenue growth of 2.5% and net operating income to rise 1.8% year over year. For the quarter under discussion, we project financial occupancy of 95.7%, down 20 basis points sequentially. We expect interest expenses to increase 12.2% year over year in the first quarter.

For the first quarter of 2025, Essex Property projected core FFO per share in the range of $3.86-$3.98, with the midpoint being $3.92. ESS projected first-quarter blended rate growth for its same-property portfolio of 2.00% to 3.00%, with the mid-point at 2.50%.

Before the first-quarter earnings release, Essex Property’s activities were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has been revised a cent south in the past two months to $3.92. However, it suggests a year-over-year increase of 2.35%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

What Our Quantitative Model Predicts for ESS Stock

Our proven model does not conclusively predict a surprise in terms of FFO per share for Essex Property this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here. 

Essex Property currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.52%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are two stocks from the broader REIT sector — Welltower Inc. WELL and Camden Property Trust CPT — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.

Welltower, scheduled to report quarterly numbers on April 28, has an Earnings ESP of +1.69% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Camden Property Trust is slated to report quarterly numbers on May 1. CPT has an Earnings ESP of +0.26% and carries a Zacks Rank of 3 at present.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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