Public Storage (PSA) Q4 FFO Beats Estimates, Revenues Up
Public Storage’s PSA fourth-quarter 2016 core funds from operations (“FFO”) per share of $2.65 surpassed the Zacks Consensus Estimate of $2.63. The figure is also 8.2% higher than the prior-year quarter tally of $2.45.
Results reflect an improvement in net operating income (“NOI”) from both same-store and non-same store facilities.
Quarterly revenues of $651.4 million climbed 6.9% from the prior year; however missed the Zacks Consensus Estimate of $657 million.
For full-year 2016, the company reported core FFO per share of $9.79, up 10.0% from a year ago. Revenues of $2.56 billion jumped an impressive 7.5% year over year.
Behind the Headlines
Same-store revenues were up 4.6% year over year to $530.4 million during the fourth quarter, while NOI climbed 5.1% to $420.4 million. The increase in same-store revenues was primarily driven by a 4.9% rise in realized annual rental income per occupied square feet to $16.99. However, the weighted-average square foot occupancy of 93.7%, contracted 20 basis points year over year.
Moreover, the company’s NOI from non-same store facilities enhanced because of 337 self-storage facilities acquired, developed or expanded since Jan 2013.
Portfolio Activity
In fourth-quarter 2016, Public Storage bought 23 self-storage facilities, comprising 1.8 million net rentable square feet, for $159 million. Following the quarter end, the company acquired or was under contract to acquire five self-storage facilities, spanning 0.3 million net rentable square feet, for $26 million.
Finally, as of Dec 31, 2016, the company had several facilities in development (4.2 million net rentable square feet), with an estimated cost of $520 million, as well as expansion projects (1.1 million net rentable square feet) worth an estimated $140 million. Public Storage projects to incur the remaining $430 million of development costs related to these projects mainly over the next 18 months.
Liquidity
Public Storage exited fourth-quarter 2016 with around $183.7 million of cash and cash equivalents, up from $104.3 million at the end of the prior year.
Dividend
On Feb 22, 2017, Public Storage’s Board of Trustees declared a quarterly dividend of $2.00 per share. The amount will be paid on Mar 30, 2017 to shareholders of record as of Mar 15.
In Conclusion
Public Storage is a recognized and established name in the self-storage industry in the U.S. Its solid presence in major cities serves as a key growth driver. Acquisition and expansion initiatives are likely to propagate growth. However, softness in demand and rising supply in some of the markets remain headwinds for the company. Rate hike also increases its woes.
Public Storage currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Public Storage Price, Consensus and EPS Surprise
Public Storage Price, Consensus and EPS Surprise | Public Storage Quote
Further, shares of Public Storage outperformed the Zacks categorized REIT and Equity Trust – Other industry over the past three months. Over this time frame, Public Storage shares logged in a return of 10.5% against the 7.5% ascend of the industry.
Key Picks
Investors interested in the REIT industry may consider stocks like The GEO Group, Inc. GEO, Mack-Cali Realty Corporation CLI and Cousins Properties Incorporated CUZ. While GEO Group has a Zacks #1 Rank, Mack-Cali and Cousins Properties carry a Zacks Rank #2 (Buy).
The GEO Group’s 2017 estimates climbed 3.8% to $2.99 per share, over the past 60 days.
Mack-Cali presently has a long-term growth rate of 5.8%.
Moreover, Cousins Properties’ 2017 estimates inched up 1.7% to 60 cents per share, over the last 30 days.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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