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Public Storage (PSA) Beats Q2 FFO and Revenue Estimates - Analyst Blog

Backed by higher revenues, Public Storage’s PSA second-quarter 2015 funds from operations (“FFO”) per share came in at $2.15, up from $1.99 reported in the year-ago period. Core FFO per share was $2.17, ahead of $1.97 recorded in the prior year quarter. Results beat the Zacks Consensus Estimate of $2.14 and reflected the increase in net operating income from both same-store and non-same store facilities.

During the reported quarter, this self-storage real estate investment trust (“REIT”) recorded a 10.1% year-over-year surge in total revenue to $592.6 million. The figure also exceeded the Zacks Consensus Estimate of $586 million.

Inside the Headlines

Same-store revenues increased 6.8% year over year to $487.2 million during the second quarter, while net operating income (“NOI”) climbed 9.0% to $358.1 million. The increase in same-store revenues was primarily driven by a 6.3% rise in realized annual rent per occupied square foot to $15.44.

The company also experienced a year-over-year increase of 70 basis points (bps) in weighted-average square foot occupancy to 95.4%. Moreover, the company’s NOI from non-same store facilities increased, backed by the acquisition of 173 self-storage facilities since Jan 2013.

Portfolio Activity

In second-quarter 2015, Public Storage bought four self-storage facilities – three in Texas and one in California – spanning 0.3 million net rentable square feet – for $39.9 million in total and a land lease buyout for $15.6 million. The company is presently under contract to acquire nine self-storage facilities – three in Colorado and six in Florida –with 0.7 million net rentable square feet for $97 million.

Moreover, on Jun 30, 2015, Shurgard Europe purchased 23 facilities in the Netherlands –0.9 million net rentable square feet – for a total of around $130 million (€117 million).

Liquidity

Public Storage exited second-quarter 2015 with around $20.3 million of cash and cash equivalents, down from $187.7 million at 2014-end.

Dividend Update

On Jul 29, 2015, Public Storage announced quarterly dividend of $1.70 per share. The amount will be paid on Sep 30 to shareholders of record as of Sep 15.

In Conclusion

We keep faith in the company’s strong brand image, a recognized name in the self-storage industry. Acquisition initiatives are further likely to aid growth. Yet, an expected rise in interest rates in the medium term may pose a challenge to the company.

Public Storage currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Prologis, Inc. PLD, PS Business Parks Inc. PSB and Sovran Self Storage Inc. SSS. All these stocks carry a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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PROLOGIS INC (PLD): Free Stock Analysis Report
 
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