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Extra Space Storage (EXR) Up 5.8% Since Earnings Report: Can It Continue?

Zacks Equity Research
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A month has gone by since the last earnings report for Extra Space Storage Inc EXR. Shares have added about 5.8% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is EXR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Extra Space Storage Q1 FFO In Line, Revenues Grow Y/Y

Extra Space Storage’s first-quarter 2018 core FFO as adjusted per share of $1.09 came in line with the Zacks Consensus Estimate. The figure also came in 5.8% higher than the prior-year tally.

Results reflect growth in property-rental revenues and improvement in same-store NOI. Particularly, higher rental rates supported growth.

Quarterly revenues of $285.5 million climbed 8.5% year over year. However, it narrowly missed the Zacks Consensus Estimate of $286.8 million.

Behind the Headlines

Same-store revenues increased 5.2% year over year to $234.1 million during the first quarter, while same-store NOI climbed 4.5% to $167.2 million. The rise in same-store revenues was driven by higher rental rates for both new and existing customers. Same-store occupancy was 92.1% as of Mar 31, 2018, up 10 basis points from 92.0% as of Mar 31, 2017.

Notably, during the reported quarter, Atlanta, Indianapolis, Las Vegas, Los Angeles and Sacramento were the major markets, which recorded revenue growth above the company's portfolio average. However, markets, which performed below the company's portfolio average, include Charleston, Dallas, Houston, Norfolk/Virginia Beach and West Palm Beach/Boca Raton.

Portfolio Activity

Extra Space Storage acquired three operating stores, one store at the completion of construction and it also purchased its joint-venture partners' interest in a store for a total investment of $69.9 million. Also, the company purchased one Certificate of Occupancy store and finished a development with joint-venture partners for $22.8 million, out of which the company’s shares were $14.9 million.

Notably, as of Mar 31, 2018, the company managed 456 stores for third-party owners. Moreover, with additional 216 stores owned and operated in joint ventures, the company’s total stores under management reached 672.

Balance Sheet

Extra Space Storage exited first-quarter 2018, with roughly $35.5 million of cash and cash equivalents, down from $55.7 million at the end of 2017. As of Mar 31, 2018, the company's percentage of fixed-rate debt to total debt was 74.4%.

In addition, the company had $349.4 million available for issuance under the ATM program as of Mar 31, 2018.

Outlook

Extra Space Storage revised its outlook for 2018. The company now anticipates FFO as adjusted per share in the band of $4.57-$4.66.

The company projects same-store property revenue growth at 3.50-4.25% and same-store property NOI growth of around 3.25-4.50% for the year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to three lower.

Extra Space Storage Inc Price and Consensus

 

Extra Space Storage Inc Price and Consensus | Extra Space Storage Inc Quote

VGM Scores

At this time, EXR has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, EXR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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