A month has gone by since the last earnings report for Public Storage (PSA). Shares have added about 2.4% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Public Storage Q3 FFO Beats Estimates, Revenues Up Y/Y
Public Storage’s third-quarter 2018 core FFO per share of $2.70 improved 3.4% from the prior-year quarter figure of $2.61. The reported figure also surpassed the Zacks Consensus Estimate of $2.68.
Results highlight improvement in NOI from same-store and non-same store facilities. Higher realized annual rent per occupied square foot supported the company’s same-store performance. Additionally, Public Storage benefited from its expansion efforts in the reported quarter.
Quarterly revenues of $706.4 million also climbed 2.9% from the prior-year quarter. The figure also exceeded the Zacks Consensus Estimate of $704.5 million.
Behind the Headlines
Same-store revenues advanced 1.2% year over year to $574.5 million during the third quarter, while the company’s NOI inched up 0.6% to $422.3 million. The upside in same-store revenues was primarily driven by a 1.9% rise in realized annual rent per occupied square foot to $17.83. Nonetheless, the weighted-average square foot occupancy of 94.0% contracted 60 basis points year over year.
In addition, the company’s NOI from non-same store facilities grew on the back of the 153 self-storage facilities acquired and developed since January 2016.
During the Sep-end quarter, Public Storage bought 11 self-storage facilities, comprising 0.7 million net rentable square feet of area, for $73.8 million. Following Sep 30, 2018, the company acquired or was under contract to acquire nine self-storage facilities, spanning 0.6 million net rentable square feet of space, for $79.7 million.
Finally, as of Sep 30, 2018, the company had several facilities in development (1.6 million net rentable square feet), with an estimated cost of $251 million, as well as expansion projects (3.8 million net rentable square feet) worth roughly $346 million. Public Storage estimates to incur the remaining $343 million of development costs related to these projects mainly over the next 18 months.
Public Storage exited third-quarter 2018 with around $432.5 million of cash and cash equivalents, slightly 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.
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 36.6% (35.2% assuming exercise of the “green shoe”). Therefore, even with no share sell off, the company will record a gain on disposition in the current quarter, which will be as if the company had sold a proportionate share of its investment in Shurgard Europe.
Additionally, on Jul 13, 2018, the company received a cash distribution of $145.4 million from Shurgard Europe.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
At this time, Public Storage has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
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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