$4.00 per Share Prompts Essex to Raise 2026 Core Earnings Outlook
Key Facts
Essex Property Trust reported core funds from operations of $4.00 per diluted share in the third quarter, up 0.8% from $3.97 a year earlier, and raised its full-year 2026 outlook. The company said the quarterly result exceeded the midpoint of its guidance range by $0.01 per share, driven by growth in same-property revenue. By contrast, total funds from operations were $3.98 per share, down 1.2% from $4.03 in the year-earlier period. Diluted net income per share also fell 40.6% to $1.52, from $2.56 a year earlier. The company attributed the decline mainly to gains on property and land sales recorded in the third quarter of 2025.
The company raised its full-year same-property revenue growth range to 2.8%-3.0%, with a midpoint of 2.9%. Its previous range was 2.5%-3.1%, making the new outlook narrower and lifting the midpoint by 0.10 percentage points. It also raised its same-property net operating income growth range to 2.8%-3.2%, with a midpoint of 3.0%. Previous guidance ranged from 2.3% to 3.3%, and the company raised its midpoint by 0.20 percentage points. The revisions also include earnings expectations, as the company narrowed its full-year core funds from operations range and raised its midpoint.
The expected full-year core funds from operations range is now $16.10-$16.22 per diluted share, with a midpoint of $16.16. That is a $0.02 increase in the midpoint from the previous guidance, which stood at $16.14 in July after being raised by $0.20 at the time. For the fourth quarter, the company expects a range of $3.95 to $4.07 per share, with a midpoint of $4.01. Core funds from operations for the first nine months of 2026 were $12.15 per share, compared with $11.96 in the same period a year earlier, an increase of 1.6%. That puts the third-quarter result within cumulative operating earnings growth for the year through the end of September.
At the operating level, same-property revenue grew 3.0% year over year in the third quarter, while net operating income rose 3.1%. Same-property revenue increased 1.0% from the second quarter, with growth across all regions and continued strength in Northern California, the company said. Northern California was the fastest-growing region, with a 5.4% annual increase. By comparison, revenue rose 1.5% in Southern California and 1.3% in the Seattle region. The varying rates reflect differences in revenue growth across the regions where the company operates.
Essex said scheduled rents contributed 2.5 percentage points to same-property revenue growth in the third quarter. Other income added 0.4 percentage points, while the impact of vacancies was 0.1 percentage points. Same-property operating expenses grew 2.8% year over year, compared with revenue growth of 3.0%. As a result, same-property net operating income growth reached 3.1%, outpacing expense growth. The figures show how revenue gains, alongside slower expense growth, contributed to net operating income growth.
Despite raising its annual outlook, the quarterly result narrowly missed Zacks estimates. Revenue was $492.69 million, compared with a consensus estimate of $493.50 million. Core funds from operations of $4.00 per share also came in below the $4.01 estimate. Zacks said revenue rose 4.1% year over year. The results combine annual operating growth and a raised outlook on one hand, with quarterly revenue and earnings falling short of estimates on the other.
On the financing front, the company obtained a $275 million unsecured term loan in September at a rate equal to the secured overnight financing rate plus 0.80%. The loan matures in September 2029, with two one-year extension options at the company's discretion. Available liquidity exceeded $1.7 billion as of September 30, 2026. During the third quarter, the company sold three apartment communities for a total contract price, calculated on a pro rata share basis, of $111.9 million. These items provide details on financing and asset dispositions during the period in which the company reported its results.
The company's shares, listed under the ticker ESS, closed at $275.30 on October 26 and $274.85 on October 27, according to EL7 data. At that latest closing price, the stock was down 3.27% over the previous three months and up 11.19% over the previous twelve months, according to Investing.com data. These prices alone do not attribute the share movement to the earnings announcement. The company is scheduled to hold its third-quarter earnings conference call on October 28, 2026, at 9 a.m. Pacific time, corresponding to 12 p.m. Eastern time. The call follows the announcement of revised guidance and quarterly results and gives management an opportunity to discuss the details.