public storage (Message of public interest – Free Report) is expected to release third quarter 2022 results on November 1 after market close. Its quarterly earnings and funds from operations (FFO) per share are likely to have seen year-over-year increases.
In the last reported quarter, this self-storage real estate investment trust (REIT) recorded a surprise of 1.79% in terms of FFO per share. The results reflected an improvement in realized annual rent per available square foot in the reported quarter. The company has benefited from its expansion efforts through acquisitions, developments and expansions.
Over the past four quarters, Public Storage has exceeded the Zacks consensus estimate on all occasions, averaging 3.06%. The graphic below depicts the company’s surprise story:
Let’s see how things went before this announcement.
Key factors
Public Storage should have benefited from its strong presence in key cities and strong brand value in the third quarter. PSA is also likely to have benefited from its technological advantage amid favorable market fundamentals and to maintain a healthy balance sheet position.
Additionally, the company capitalized on growth opportunities. During the end of June quarter, Public Storage acquired 10 self-storage facilities with a net leasable area of 0.7 million square feet for $123.6 million.
After June 30, 2022, the company acquired or was under contract to acquire 24 self-storage facilities covering 1.7 million net leasable square feet of space in 10 states for $257.4 million. These acquisition and expansion initiatives should have fueled the company’s growth during the review period.
Of these, Public Storage likely saw revenue growth in the quarter, with healthy rental rates. Additionally, PSA has one of the strongest balance sheets in the industry with ample liquidity to capitalize on opportunities for expansion through acquisitions and development. This trend probably continued in the third quarter as well.
Zacks’ consensus estimate for quarterly revenue is $1.07 billion, a 19.3% year-over-year increase.
Zacks’ consensus estimate for third-quarter revenue from self-storage facilities is $989.7 million. This suggests an increase from the $973.3 million recorded in the prior quarter and $840.5 million in the prior year.
Quarterly revenue from ancillary businesses is currently projected at $56.9 million, down slightly from the previous quarter’s figure of $58.8 million, but ahead of the $54.4 million recorded in the previous quarter. the comparable period last year.
PSA’s activity during the quarter under review was sufficient to win the confidence of analysts. The Zacks consensus estimate for third-quarter FFO per share was revised up one cent to $4.05 last month. It also forecasts 18.4% year-over-year growth.
However, as the impact of the pandemic subsides, the vacancy rate is expected to increase. In addition, we are witnessing a boom in the development of self-storage units in several markets. This high offer probably fueled the competition.
Here is what our quantitative model predicts:
Our proven model predicts a surprise FFO per share for Public Storage this season. The combination of a positive ESP Earnings and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chance of an FFO beat, which is the case here.
PSA currently has a Zacks Rank of 3 and an Earnings ESP of +1.34%. You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.
Other actions worth a look
Here are some other REIT stocks — Additional storage space Inc. (EXR – free report) and SBA Communications Company (SBAC – Free report) – which you might want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.
Extra Space Storage, which is expected to report third quarter results on Nov. 1, currently has an EPS on earnings of +1.31% and carries a Zacks rating of 3. You can see the full list of today’s Zacks #1 Rank stocks here.
SBA Communications Corporation, which is expected to release quarterly numbers on Oct. 31, currently has an earnings ESP of +0.44% and a Zacks rating of 3.
Stay on top of upcoming earnings announcements with Zacks Earnings Calendar.
To note: Everything related to earnings presented in this article represents funds from operations (FFO) – a metric widely used to assess the performance of REITs.
