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Factors to Impact Public Storage (PSA)This Earnings Season

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·5 min read
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Public Storage PSA is slated to release first-quarter 2021 earnings on Apr 28, after the bell. Both its quarterly revenues and funds from operations (FFO) per share are likely to display year-over-year increases.

In the last reported quarter, this self-storage real estate investment trust (REIT) reported a surprise of 2.81% in terms of FFO per share. Results reflected an improvement in occupancy in the reported quarter. The company also benefited from its expansion efforts through acquisitions, development and extensions.

Over the trailing four quarters, the company beat estimates on two occasions, met in another and missed in the other, the average surprise being 0.40%.This is depicted in the graph below:

Public Storage Price and EPS Surprise

Public Storage Price and EPS Surprise
Public Storage Price and EPS Surprise

Public Storage price-eps-surprise | Public Storage Quote

Let’s see how things have shaped up prior to this announcement.

Key Factors

During the first quarter, Public Storage is likely to have benefited from its solid presence in key cities and high brand value. In addition, the company has been capitalizing on growth opportunities. Recently, management noted that since the start of 2019, it has enhanced its portfolio by roughly 21 million net rentable square feet, or 13%, through $4.1 billion of acquisitions, development, and redevelopment, including properties under contract.Such acquisition and expansion initiatives are also anticipated to have stoked growth during the period under consideration.

Moreover, the self-storage industry continues to benefit from favorable demographic changes. Specifically, migration and downsizing trends have spurred the needs of consumers to rent spaces at storage facilities to park their possessions. Further, demand for self-storage spaces has shot up amid the flexible working environment as well as improving housing market, while move-outs remain low amid the health crisis, resulting in improved year-over-year occupancy trends and increased average length of stay. This supports revenue growth because of more long-term tenants becoming eligible for rate hikes, and a lesser need to replace vacating tenants with new tenants that lowers promotional expenses and increase its pricing leverage. Particularly, during the first half of 2021, the company expected continued revenue growth supported by increased customer demand and modest move-out activity.

Additionally, Public Storage has one of the strongest balance sheets in the sector, with adequate liquidity to withstand these challenging times, and bank on expansion opportunities through acquisitions and developments. This is likely to have continued in the first quarter as well.

Amid these, the Zacks Consensus Estimate for first-quarter revenues from self-storage facilities is currently pinned at $706 million, suggesting an increase from the $699 million witnessed in the prior quarter and $674 million in the year-ago period. Quarterly revenues from ancillary operations are presently projected at $45.75 million, indicating a rise from the $41.88 million registered in the comparable period last year.

The Zacks Consensus Estimate for quarterly revenues is currently pinned at $750.41 million, calling for a 4.8% year-over-year increase.

Apart from this, Public Storage’s activities during the quarter under review were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share has been revised a cent upward to $2.70 in a month’s time. It also calls for 4.65% year-over-year growth.

However, the company operates in a highly-fragmented market in the United States, with intense competition from numerous private, regional and local operators. Furthermore, there is a development boom of self-storage units in several markets. This high supply is expected to have fueled competition, curbed its power to raise rents and turned on more discounting during the quarter under consideration.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Public Storage this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Public Storage currently carries a Zacks Rank #3 (Hold) and has an Earnings ESP of -0.47%.

Stocks That Warrant a Look

Here are a few 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:

Digital Realty Trust, Inc. DLR, scheduled to report quarterly numbers on Apr 29, currently has an Earnings ESP of +1.06% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

CubeSmart CUBE, slated to release first-quarter numbers on Apr 29, has an Earnings ESP of +3.14% and carries a Zacks Rank of 3 at present.

Welltower, Inc. WELL, set to announce quarterly results on Apr 28, currently has an Earnings ESP of +0.93% and carries a Zacks Rank of 3.

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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Public Storage (PSA) : Free Stock Analysis Report

Digital Realty Trust, Inc. (DLR) : Free Stock Analysis Report

CubeSmart (CUBE) : Free Stock Analysis Report

Welltower Inc. (WELL) : Free Stock Analysis Report

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