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Will Expansion Efforts Aid Public Storage (PSA) Q3 Earnings?

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Company News For Nov 12, 2018

Companies In The News Are: YELP,ATVI,SWKS,DIS

Public Storage PSA is slated to release its quarterly numbers on Oct 30, after the market closes. The company’s funds from operations (FFO) per share as well as revenues are anticipated to display year-over-year improvement in the third quarter.

In the last reported quarter, this self-storage real estate investment trust (REIT) reported better-than-expected performance in terms of FFO per share, delivering a positive surprise of 1.53%. Results highlighted improvement in net operating income (NOI) from same-store and non-same store facilities.

The company has a decent surprise history. In fact, it exceeded estimates in each of the preceding four quarters, resulting in an average positive surprise of 0.96%. This is depicted in the graph below:

Public Storage Price and EPS Surprise
 

Public Storage Price and EPS Surprise | Public Storage Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

One of the largest owners and operators of storage facilities in the United States, Public Storage has presence in all major metropolitan markets of the nation. The ‘Public Storage’ brand is the most recognized and established name in the self-storage industry.

Notably, the self-storage industry is anticipated to experience solid demand backed by favorable demographic changes, improving job market and rising incomes. Further, acquisition and expansion initiatives are anticipated to stoke growth.

In fact, since the beginning of 2013 through Jun 30, 2018, the company acquired 276 facilities with 19.4 million net rentable square feet from third parties for around $2.5 billion. Further, the company has newly developed and expanded self-storage space for a total cost of $1.1 billion, adding approximately 10.0 million net rentable square feet during this period. Such efforts have also continued in the third quarter.

As such, in the quarter, the company’s performance will likely reflect the benefit from steady demand in the self-storage industry, as well as growth in revenues and NOI. The Zacks Consensus Estimate for revenues is pegged at $706.8 million, depicting growth of 3%.

Furthermore, Public Storage’s activities during the quarter gained analysts’ confidence. Consequently, the Zacks Consensus Estimate for FFO per share, which witnessed a marginal increase over the last 30 days, is currently pegged at $2.69. The figure also indicates nearly 3.1% rise, year over year.

However, supply has been high in a number of markets and this adversely affects the company’s pricing power. In fact, Public Storage operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. This limits its power to raise rents and turn on more discounting.

Here is what our quantitative model predicts:

Public Storage has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for the company is +0.27%.

Zacks Rank: It carries a Zacks Rank of 3, currently.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat in terms of FFO per share. This, when combined with a favorable Zacks Rank, makes us reasonably confident of a positive surprise.

Other Stocks That Warrant a Look

Here are a few other stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Regency Centers Corporation REG, scheduled to release earnings on Oct 25, has an Earnings ESP of +0.21% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Welltower Inc. WELL, slated to release third-quarter results on Oct 30, has an Earnings ESP of +1.06% and a Zacks Rank of 3.

Extra Space Storage Inc. EXR, scheduled to report its quarterly numbers on Oct 30, has an Earnings ESP of +0.14% and a Zacks Rank #3.

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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Regency Centers Corporation (REG) : Free Stock Analysis Report
 
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Welltower Inc. (WELL) : Free Stock Analysis Report
 
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