What's in Store for Extra Space Storage (EXR) in Q1 Earnings?
Extra Space Storage EXR, a leading self-storage real estate investment trust (REIT) in the United States, is set to release its first-quarter 2023 earnings on May 2 after market close. The company has been steadily expanding its footprint and diversifying its operations. As the market anticipates the earnings announcement, this article provides an in-depth preview of EXR’s expected performance in the first quarter of 2023 considering overall industry trends, the company's growth strategy and recent acquisitions.
In the last reported quarter, this Salt Lake City, Utah-based REIT delivered a surprise of 0.48% in terms of core funds from operations (FFO) per share. Results reflected a better-than-anticipated top line.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on each occasion, the average beat being 3.58%. The graph below depicts this surprise history:
Extra Space Storage Inc Price and EPS Surprise
Extra Space Storage Inc price-eps-surprise | Extra Space Storage Inc Quote
Factors to Consider
Extra Space Storage has been pursuing a multi-faceted growth strategy, which includes strategic acquisitions, third-party management services and joint ventures. In recent years, the company has successfully executed several acquisitions that have expanded its portfolio, increased market share and added value for shareholders.
In the first quarter too, Extra Space Storage is likely to have continued to benefit from its solid presence in key cities and measures to boost its geographical footprint through accretive acquisitions and third-party management. In addition, EXR's ongoing focus on enhancing the customer experience through technology integration and improved operational efficiency is likely to strengthen its competitive advantage.
High brand value and technological advantage are expected to have aided Extra Space Storage’s top and bottom lines in the quarter under consideration. Also, this REIT is likely to have maintained a healthy balance sheet position.
However, with the pandemic’s impact waning, the self-storage industry is witnessing an elevation in vacating activity, resulting in falling occupancy levels. Tenants are likely to revert to more normal move-out behavior, leading to adverse pressure on rate growth in many markets. With a return of seasonality, rates and occupancy are likely to experience some pressure.
However, EXR operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. In addition, there is a development boom of self-storage units in several markets. This high supply is likely to have fueled competition. Also, a hike in the interest rate is a concern for Extra Space Storage. Rising rates imply higher borrowing costs for the company, affecting its ability to purchase or develop real estate.
Projections for Q1
The Zacks Consensus Estimate of $439.25 million for quarterly property rental revenues suggests a slight increase from the prior quarter’s $438.10 million and the year-ago period’s $379.81 million. Management and franchise fees for the quarter are projected at $21.25 million, almost flat sequentially but ahead of the year-ago quarter’s $19.96 million. The Zacks Consensus Estimate of $513.68 million for quarterly revenues suggests a 15.81% increase year over year.
Extra Space Storage’s activities during the quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has moved a cent south to $2.05 in the past month. However, it calls for a 1.99% year-over-year rise.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Extra Space Storage this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
Extra Space Storage currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
However, our model shows that Americold Realty Trust, Inc. COLD and Xenia Hotels & Resorts, Inc. XHR have the right combination of elements to report a surprise this quarter.
Americold Realty Trust, scheduled to report quarterly numbers on May 4, has an Earnings ESP of +17.72% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Xenia Hotels & Resorts is slated to report quarterly numbers on May 2. XHR has an Earnings ESP of +5.06% and carries a Zacks Rank of 3 presently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Conclusion
With a strong market position, a diversified portfolio and commitment to enhancing customer experience through technological advancements, Extra Space Storage is likely to maintain its upward trajectory in the foreseeable future. As a result, the company presents an attractive investment opportunity for those seeking exposure to the thriving self-storage sector.
However, investors should also consider potential risks and uncertainties, such as interest rate fluctuations and macroeconomic factors, before making any investment decisions. Stay tuned for the first-quarter 2023 earnings release to gain insights into EXR’s performance and prospects.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Extra Space Storage Inc (EXR) : Free Stock Analysis Report
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