Essex Property Stock Gains 12.6% in Three Months: Will the Trend Last?

Shares of Essex Property Trust ESS have gained 12.6% over the past three months, outperforming the industry's upside of 8.6%.

This residential REIT is well-poised to gain from a robust West Coast property base with several demand drivers. Efforts to leverage technology, scale and organizational capabilities are expected to drive margin expansion and bring operational efficiency across the company's portfolio. A healthy balance sheet also augurs well for growth.

Analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2025 funds from operations (FFO) per share increased a cent in the past month to $15.93.

Let’s check out the possible factors behind the surge in the company’s stock price and see whether the trend will last or not.

Essex Property’s substantial exposure to the West Coast market has offered ample scope to enhance its top line. The West Coast is home to several innovative technology companies that drive job creation and income growth. With layoffs in the tech industry slowing and a return to office gaining momentum, West Coast markets are likely to see an increase in renter demand in the near term. All of these factors pave the way for healthy demand and strong revenue growth for ESS in the future.

The company is also banking on its technology, scale and organizational capabilities to drive margin expansion across its portfolio and bring about operational efficiency by lowering costs. These efforts are likely to have an incremental effect on top-line and bottom-line growth, positioning Essex Property to ride the growth curve.

Essex Property maintains a healthy balance sheet and enjoys financial flexibility. As of March 31, 2025, the company had $1.4 billion of liquidity through an undrawn capacity on its unsecured credit facilities, cash, cash equivalents and marketable securities.

Over the years, it has made efforts to increase its unencumbered net operating income (NOI) to an adjusted total NOI, which was 92% at the end of the first quarter of 2025. As of the same date, this residential REIT had Baa1/Stable and BBB+/Stable ratings from Moody’s Investor Service and Standard and Poor's, respectively. With a solid liquidity position and investment-grade ratings, the company is well-poised to ride its growth curve.

Solid dividend payouts are the biggest attraction for REIT investors, and Essex Property has been steadily raising its payout. The company has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 4.95%. With a decent balance sheet strength, the dividend payout is expected to be sustainable over the long run.

With the above-mentioned factors, we believe the rising trend in the stock is expected to continue in the near term.

Risks Likely to Affect ESS’ Positive Trend

The elevated supply of apartment units in some of the company’s markets is likely to fuel competition and curb pricing power. Moreover, Essex Property’s significant concentration of assets in Southern California, Northern California, and the Seattle metropolitan area makes the company’s operating results and financial conditions susceptible to any unfavorable fluctuations in local markets.

Stocks to Consider

Some better-ranked stocks from the residential REIT sector are Elme Communities ELME and Broadstone Net Lease BNL, each currently carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for ElME’s 2025 FFO per share stands at 95 cents, indicating an increase of 1.1% from the year-ago reported figure.

The Zacks Consensus Estimate for BNL’s 2025 FFO per share is pinned at $1.47, suggesting year-over-year growth of 2.80%.

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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