PS Business Parks Inc. (PSB) has planned a significant divestiture program for the coming quarters, with the aim of leaving Portland, Sacramento, and Phoenix markets. Although this will provide the dry powder for acquiring well located, underperforming assets at discounts to replacement costs, its near-term earnings dilution effect cannot be evaded.
The company also came up with lower-than-expected first-quarter 2014 results in April. The company’s adjusted FFO per share came in at $1.22, a penny shy of the Zacks Consensus Estimate as well as the prior-year quarter figure. This was mainly due to a rise in share count from the Nov 2013 common share offering. Also, high snow removal costs added to the woes.
Additionally, Moreover, PS Business Parks’ portfolio is not likely to experience any robust growth in the near term as currently, persistent office space efficiency trends are continuing to limit any significant recovery in the office sector fundamentals.
For detailed insight into PS Business Parks, you can refer to our updated research report, which was issued on Jul 17, 2014.
Echoing similar sentiments, analysts have revised their estimates in downward direction. The Zacks Consensus Estimate for FFO per share for 2014 slipped 4.5% to $4.86. Also, for 2015, it decreased 4.7% to $5.11. Consequently, the stock currently has a Zacks Rank #5 (Strong Sell).
Stocks That Warrant a Look
Investors interested in the REIT industry may, however, consider stocks like Aviv REIT, Inc. (AVIV), W. P. Carey Inc. (WPC) and FelCor Lodging Trust Inc. (FCH). All three stocks have a Zacks Rank #1 (Strong 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.