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Extra Space Storage (EXR) Beats on Q1 FFO, Suspends View

Zacks Equity Research
·5 min read

Extra Space Storage, Inc.’s EXR first-quarter 2020 core funds from operations (FFO) per share of $1.24 outpaced the Zacks Consensus Estimate of $1.20. The figure also comes in 6.9% higher than the prior-year quarter’s $1.16.

Results reflect growth in same-store revenues on higher occupancy and net rental rates for customers. However, the company witnessed rise in payroll, marketing expenses, repairs and maintenance, and property taxes.

Quarterly revenues came in at $332.5 million, up 6.7% year over year. However, the revenue figure missed the Zacks Consensus Estimate of $332.9 million.

The company informed that it has collected about 93% of total rents for April compared with 98% witnessed in April 2019. The collection was lower partially due to the company temporarily postponing auctions and other collections efforts.

The company withdrew its current-year guidance due to uncertainties related to the coronavirus pandemic.

Quarter in Detail

Same-store rental revenues inched up 1.9% year over year to $270.1 million during the first quarter, while same-store NOI was up 1.2% to $191.7 million. This upswing in same-store revenues stemmed from higher occupancy and net rental rates for customers. Same-store square foot occupancy was 91.3% as of Mar 31, 2020, down 10 basis points year on year.

Notably, during the first quarter, Chicago, Las Vegas, Memphis, Norfolk/Virginia Beach, Oklahoma City and Phoenix were the major markets, which registered revenue growth above the company's portfolio average.

Nonetheless, markets including Charleston, Houston, Miami, San Diego and Tampa, performed below the company's portfolio average.

Balance Sheet

Extra Space Storage exited first-quarter 2020, with $93.3 million of cash and cash equivalents, up from the $65.7 million recorded at the end of 2019. The company had $546 million in revolving line of credit availability as of Mar 31, 2020. As of Mar 31, 2020, the company's percentage of fixed-rate debt to total debt was 78.3%.

During the quarter, the company repurchased 653,597 shares of common stock using its stock-repurchase program at an average purchase price of $79.85 per share for a total cost of $52.2 million including transaction costs. As of Mar 31, 2020, the company had authorization to purchase up to an additional $347.8 million under the plan.

During the March-end quarter, the company did not sell any shares of common stock using its ATM program. Extra Space Storage had $298.6 million available for issuance under its ATM program as of Mar 31, 2020.

Portfolio Activity

During the first quarter, Extra Space Storage acquired one operating store and one store at completion of construction for $19.4 million. Moreover, in conjunction with its joint-venture partners, the company purchased one operating store and two completion of construction stores, for a total cost of $40.6 million. Of this, the company invested $9.7 million.

Extra Space Storage added 48 stores (gross) to the company’s third-party management platform. As of Mar 31, 2020, it managed 676 stores for third-party owners. Furthermore, with additional 249 stores owned in joint ventures, total stores under management summed 925.

Dividend Update

On Mar 31, 2020, the company paid a first-quarter common stock dividend of $0.90 per share to stockholders of record at the close of business on Mar 16, 2020.

Outlook

Extra Space Storage withdrew its 2020 guidance in light of the coronavirus pandemic, though the company remarked that it might reinstate its guidance once the economic impact from the pandemic gets clearer.

The company had earlier projected full-year 2020 core FFO per share of $4.99-$5.08. This was backed by same-store revenue growth of 0.75-1.75% and same-store NOI growth of around -0.5 to 1% for the year (excluding tenant reinsurance).

Extra Space Storage currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extra Space Storage Inc Price, Consensus and EPS Surprise

Extra Space Storage Inc Price, Consensus and EPS Surprise
Extra Space Storage Inc Price, Consensus and EPS Surprise

Extra Space Storage Inc price-consensus-eps-surprise-chart | Extra Space Storage Inc Quote

We, now, look forward to the earnings releases of other REITs like Outfront Media Inc. OUT, Kimco Realty Corp. KIM and Ventas, Inc. VTR, which are slated to report quarterly numbers on May 8.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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