It has been about a month since the last earnings report for Public Storage (PSA). Shares have added about 4.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Public Storage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Public Storage Q4 FFO and Revenues Improve Y/Y
Public Storage’s fourth-quarter 2018 core FFO per share of $2.81 improved 2.2% from the prior-year figure of $2.75. The Zacks Consensus Estimate for FFO per share was $2.79.
Results highlight higher realized annual rent per occupied square foot that supported the company’s same-store performance. Additionally, Public Storage benefited from its expansion efforts in the reported quarter.
Quarterly revenues of $692.5 million also climbed 3% from the prior-year quarter. The Zacks Consensus Estimate for revenues was $692.7 million.
For full-year 2018, core FFO per share came in at $10.56, 3.2% ahead of the prior-year tally of $10.23. This was backed by 3.2% year-over-year growth in revenues to $2.75 billion.
Behind the Headlines
Same-store revenues advanced 1.2% year over year to $561.9 million during the fourth quarter, while the company’s NOI inched up 0.4% to $438.8 million. The upside in same-store revenues was primarily driven by a 1.8% rise in realized annual rent per occupied square foot to $17.68.
Nonetheless, the weighted-average square foot occupancy of 92.6% contracted 50 basis points year over year.
In addition, the company’s NOI from non-same store facilities grew on the back of the 164 self-storage facilities acquired and developed since January 2016.
During the Dec-end quarter, Public Storage bought nine self-storage facilities, comprising 0.6 million net rentable square feet of area, for $73.2 million. Following Dec 31, 2018, the company acquired or was under contract to acquire 14 self-storage facilities, spanning 0.9 million net rentable square feet of space, for $102.4 million.
Finally, as of Dec 31, 2018, the company had several facilities in development (1.7 million net rentable square feet), with an estimated cost of $253 million, as well as expansion projects (3.5 million net rentable square feet) worth roughly $354 million.
Public Storage estimates to incur the remaining $322 million of development costs related to these projects, over the next 18 months.
Public Storage exited 2018 with around $361.2 million of cash and cash equivalents, down from $433.4 million recorded at the end of the previous year.
Shurgard Europe Update
On Oct 15, Shurgard Europe completed an initial public offering. Its shares started trading on Euronext Brussels under the “SHUR” symbol. Shurgard Europe issued 25 million of its common shares to third parties, at a price of €23 per share.
As a result of this offering, Public Storage’s equity interest, consisting of a direct and indirect pro-rata ownership interest in 31.3 million shares, shrunk from 49% to 35.2%. Therefore, even with no share sell-off, the company recorded a gain on disposition of $151.6 million in the fourth quarter, which appeared as if the company had sold a proportionate share of its investment in Shurgard Europe.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
Currently, Public Storage has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Public Storage has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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