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Why Is Public Storage (PSA) Down 0.9% Since Last Earnings Report?

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  • PSA-PM

It has been about a month since the last earnings report for Public Storage (PSA). Shares have lost about 0.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Public Storage due for a breakout? 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 Q4 FFO Beats on Occupancy Gains, NOI Climbs

Public Storage's fourth-quarter 2020 core FFO per share of $2.93 surpassed the Zacks Consensus Estimate of $2.85. The figure also increased 3.2% year one year from $2.84.

Quarterly revenues of $748.5 million exceeded the Zacks Consensus Estimate $726.8 million. Moreover, revenues increased 4% year on year.

Results reflect an improvement in occupancy in the reported quarter. The company also benefited from its expansion efforts through acquisitions, development and extensions. In addition, it witnessed a decrease in on-site property manager payroll. However, the company was adversely impacted by lower realized annual rent per occupied square foot.

For full-year 2020, the company reported core FFO per share of $10.61, representing a 1.3% decrease year on year. Yet, revenues came in at $2.9 billion, up 2.1% year on year.

Behind the Headlines

Public Storage’s same-store revenues inched up 0.8% year over year to $619.5 million during the fourth quarter, highlighting improved occupancy. Particularly, weighted-average square foot occupancy of 95.2% expanded 2.3% year over year. Nonetheless, this upswing was partly offset by a 0.2% decrease in realized annual rental income per occupied square foot to $17.56.

Same-store cost of operations edged down 1.1% year over year, mainly reflecting a 9.3% fall in on-site property manager payroll. Consequently, the company’s same-store net operating income (NOI) increased 1.3% to $478.6 million.

Also, the REIT’s NOI increase from non-same store facilities was $10.2 million, on the back of the facilities acquired in 2019 and 2020, as well as the fill-up of the recently-developed and expanded facilities.

Portfolio Activity

During the December-end quarter, Public Storage acquired 43 self-storage facilities, comprising 3.7 million net rentable square feet of area, for $513.7 million. These included five facilities each in Michigan and Pennsylvania, four each in Alabama, Illinois and Texas, three each in Georgia and Missouri, two each in Arizona, Colorado, Florida, Minnesota and Ohio and one each in Maryland, Nevada, Oklahoma, Oregon and Washington. Following Dec 31, 2021, the company acquired or was under contract to acquire 40 self-storage facilities, spanning 3.5 million net rentable square feet of space across 18 states, for $580.1 million.

During the fourth quarter, the REIT opened one newly-developed facility and various expansion projects (0.4 million net rentable square feet) in Missouri, Florida and Texas costing $41.3 million.

Finally, as of Dec 31, 2020, Public Storage had several facilities in development (1.4 million net rentable square feet), with an estimated cost of $235 million, as well as expansion projects (2.2 million net rentable square feet) worth $326 million. It expects to incur the remaining $373 million of development costs related to these projects, mainly over the next 18-24 months.

Balance Sheet Position

Public Storage exited 2020 with $257.6 million of cash and equivalents, down from the $409.7 million recorded at the end of 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Public Storage has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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