A month has gone by since the last earnings report for Public Storage (
PSA Quick Quote PSA - Free Report) . Shares have lost about 3.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Public Storage Q3 FFO Beats on Rent & Occupancy Gains
Public Storage's third-quarter 2021 core FFO per share of $3.42 surpassed the Zacks Consensus Estimate of $3.23. The figure also increased 30% year on year.
Quarterly revenues of $894.9 million exceeded the Zacks Consensus Estimate of $851.9 million. Moreover, revenues increased 21.8% year on year.
Results reflect an improvement in realized annual rent per available square foot and weighted average square foot occupancy in the reported quarter. The company also benefited from its expansion efforts through acquisitions, development and extensions. Management has also raised the 2021 core FFO guidance.
Behind the Headlines
Public Storage’s same-store revenues increased 14% year over year to $716.1 million, highlighting higher realized annual rent per available square foot and weighted average square foot occupancy. This upswing was backed by a 14% increase in the realized annual rental income per available square foot to $18.68. Also, the weighted-average square foot occupancy of 96.8% expanded 1.4% year over year.
Same-store cost of operations fell 4.6%, year over year, mainly reflecting a decrease in marketing expenses, a decline in on-site property manager payroll, and a change in property tax timing contributing to a fall in property tax expense.
Consequently, the company’s same-store net operating income (NOI) increased 21.7% to $540.4 million. Also, the REIT’s NOI growth from non-same store facilities was $52.5 million, on the back of the facilities acquired in 2020 and 2021, as well as the fill-up of the recently-developed and expanded facilities.
During the September-end quarter, Public Storage acquired 27 self-storage facilities, comprising 2.2 million net rentable square feet of area, for $326.8 million. Following Sep 30, 2021, the company acquired or was under contract to acquire 107 self-storage facilities, spanning 11.8 million net rentable square feet of space across 16 states, for $2.3 billion.
During the third quarter, the REIT opened one newly-developed facility and several expansion projects costing $85.5 million. Finally, as of Sep 30, 2021, Public Storage had several facilities in development (1.7 million net rentable square feet), with an estimated cost of $272.8 million, as well as expansion projects (2.9 million net rentable square feet) worth $457.8 million. It expects to incur the remaining $502.2 million of development costs related to these projects, mainly over the next 18-24 months.
Balance Sheet Position
Public Storage exited third-quarter 2021 with $958.2 million of cash and equivalents, up from the $257.6 million recorded at the end of 2020.
For 2021, the company raised the core FFO per share outlook to $12.50-$12.80 from the prior guidance of $11.90-$12.30.
The company’s full-year assumption is backed by 9.5-10.5% growth in the same-store revenues, a 0-0.5% rise in same-store expenses and a 13.1-14.7% expansion in the same-store NOI. Further, the company expects $5 billion of acquisitions and $215 million of development openings.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
Currently, Public Storage has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Public Storage has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.