Self-storage real estate investment trust (:REIT) Public Storage (PSA) rode on the growth trajectory for a number of quarters. However, its first-quarter 2014 core FFO (funds from operations) of $1.80 per share missed the Zacks Consensus Estimate of $1.86 per share on higher expenses tied to snow removal and utilities in the cold weather as well as increased property tax expense.
In the company’s European business, though the pricing strategy helped it to enhance occupancy levels in the quarter, realized annual rent per occupied square foot moved south. Also, the company operates under significant competition and its substantial construction pipeline increases operational risks.
Nevertheless, aided by an increase in revenue, core FFO per share registered a 9.1% rise from the prior-year quarter. While the FFO estimate miss due to weather associated expenses is not encouraging, we believe that Public Storage has one of the strongest balance sheets in the sector with adequate liquidity and virtually all of the book value of its real estate facilities are unencumbered. Public Storage as a brand is widely recognized in the self-storage industry and backed by its fundamentals, we believe the company can bounce back over the long term.
To gain deeper insight into Public Storage, you can refer to our updated research report, which was issued on Jul 8, 2014.
Over the last 7 days, the Zacks Consensus Estimate for 2014 and 2015 FFO per share remained stable at $7.97 and $8.49 per share. The stock currently has a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
Investors interested in the REIT industry may also consider stocks like Aviv REIT, Inc. (AVIV), Parkway Properties Inc. (PKY) and Terreno Realty Corp. (TRNO). All these stocks carry a Zacks Rank #1 (Strong Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.