Kirpal Kooner
Bank of America Securities upgraded Essex Property Trust (NYSE:ESS), an apartment REIT focused on West Coast markets, to Buy from Neutral on Monday as analyst Joshua Dennerlein has become more upbeat on the northern California suburban residential market.
He sees four drivers for the market: Northern California rent-to-income ratio is ~25% vs. 30% nationally; return-to-office mandates are bringing workers back to the region; employment growth has resumed in the region after job losses in 2023; and 2024 projected supply growth of 1.8% is muted compared with 3.2% nationally.
“We note that ESS beat core FFO guidance every quarter in 2023 and ended the year 1.9% above its initial guidance midpoint,” Dennerlein wrote in a note to clients. “Noticeably, ESS’s FY23 core FFO ($15.03) was above the high end of its initial guidance range ($14.53-$14.97). We believe ESS is positioned for another year of beats/bumps.”
BofA analysts increased their estimate for Essex Property’s (ESS) 2024 FFO to $15.29, up from $15.04 previously and 1.0% higher than the Stree’s consensus. BofA’s 2025 FFO estimate of $16.13 rose from $15.22 prior.
The Buy rating on ESS contrasts with the SA Quant rating and the average Wall Street rating, both at Hold.
Still, Essex Property Trust (ESS) stock dropped 1.8% in Monday morning trading.