What's in Store for Public Storage (PSA) in Q3 Earnings?
Public Storage PSA is slated to release third-quarter 2023 results on Oct 30 after market close. Both its quarterly revenues and core funds from operations (FFO) per share are likely to have witnessed year-over-year increases.
In the last reported quarter, this self-storage real estate investment trust (REIT) delivered a surprise of 1.90% in terms of core FFO per share. Results reflected a better-than-anticipated top line. The company also benefited from its expansion efforts through acquisitions, developments and extensions.
Over the last four quarters, Public Storage surpassed the Zacks Consensus Estimate on all occasions, the average beat being 2.10%. The graph below depicts the surprise history of the company:
Public Storage Price and EPS Surprise
Public Storage price-eps-surprise | Public Storage Quote
Let’s see how things have shaped up before this announcement.
Key Factors
In the third quarter, Public Storage is expected to have enjoyed the advantages of its strong foothold in major urban centers, well-established brand reputation and technological edge. Additionally, PSA is likely to have profited from favorable market conditions while maintaining a robust financial position.
Public Storage has one of the strongest balance sheets in the sector, with adequate liquidity to bank on expansion opportunities through acquisitions and developments. This is likely to have continued in the third quarter as well.
From the beginning of 2021 through Jun 30, 2023, Public Storage acquired 322 facilities, with 28 million net rentable square feet, for $6 billion. Moreover, in September 2023, it acquired Simply Self Storage for $2.2 billion. Such acquisition and expansion initiatives are anticipated to have stoked the company’s growth during the period under consideration.
Amid these, Public Storage is likely to have seen growth in revenues in the quarter to be reported. The Zacks Consensus Estimate for quarterly revenues stands at $1.14 billion. This calls for a 4.63% year-over-year increase.
The Zacks Consensus Estimate for third-quarter revenues from self-storage facilities stands at $1.07 billion. This suggests an increase from the $1.03 billion witnessed in the year-ago period. Quarterly revenues from ancillary operations are presently projected at $64.47 million, ahead of the $60.76 million registered in the comparable period last year.
However, with tenants reverting to more normal move-out behavior as the pandemic’s impact abates, there is upward pressure on vacate trends. Furthermore, there is a development boom of self-storage units in several markets. This high supply is likely to have fueled competition. We estimate weighted average square foot occupancy to decline to 93% from 93.7% reported in the prior quarter.
Also, rising interest rates add to its woes. We estimate a significant year-over-year increase in interest expenses.
PSA’s activities during the quarter under review were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the third-quarter core FFO per share has been revised a cent south to $4.21 in the past month. However, it calls for 1.9% year-over-year growth.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a 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 chances of an FFO beat, which is not the case here.
PSA currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.29%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Our model shows that American Tower Corporation AMT and Digital Realty Trust DLR have the right combination of elements to report a surprise this quarter.
American Tower is slated to report quarterly numbers on Oct 26. AMT has an Earnings ESP of +0.59% and carries a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Digital Realty, scheduled to report quarterly numbers on Oct 26, has an Earnings ESP of +2.40% and carries a Zacks Rank of 3.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
American Tower Corporation (AMT) : Free Stock Analysis Report
Public Storage (PSA) : Free Stock Analysis Report
Digital Realty Trust, Inc. (DLR) : Free Stock Analysis Report
