Why is Public Storage (PSA) up 2.4% since its last earnings report?

It’s been a month since Public Storage’s (PSA) last reported earnings. Shares are up about 2.4% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Public Storage headed for a decline? Before we dive into the latest investor and analyst reaction, let’s take a quick look at the most recent earnings report to better understand the important catalysts.

Public Storage Q3 FFO beats estimates, revenues grow YoY

Public Storage’s basic FFO per share for the third quarter of 2018 was $2.70, representing a 3.4% improvement from the year-ago quarter of $2.61. The reported figure also surpassed the Zacks Consensus Estimate of $2.68.

The results highlight improvements in NOI across same-store and different-store properties. Higher realized annual rent per square meter occupied supported the company’s same-store performance. Additionally, Public Storage benefited from expansion activities during the reported quarter.

Quarterly revenue of $706.4 million was also up 2.9% from the prior-year quarter. The figure also surpassed the Zacks Consensus Estimate of $704.5 million.

Behind the headlines

Same-store revenue increased 1.2% year over year to $574.5 million in the third quarter, while the company’s NOI increased 0.6% to $422.3 million. The increase in same-store revenue was primarily driven by a 1.9% increase in annualized realized rent per occupied square foot to $17.83. However, weighted average occupancy per square foot of 94.0% declined 60 basis points year over year.

Additionally, the company’s NOI from other retail properties increased thanks to 153 self-storage properties acquired and developed since January 2016.

Wallet Activity

In late September, Public Storage acquired or was in agreement to acquire 11 self-storage facilities with a combined net lease area of ​​0.7 million square feet for $73.8 million. Since September 30, 2018, the company has acquired or was in agreement to acquire nine self-storage facilities with a combined net lease area of ​​0.6 million square feet for $79.7 million.

Finally, as of September 30, 2018, the Company had several facilities under construction (1.6 million net rentable square feet) with an estimated cost of $251 million, as well as development projects (3.8 million net rentable square feet) valued at approximately $346 million. Public Storage is expected to incur the remaining $343 million of development costs associated with these projects, primarily over the next 18 months.

Liquidity

Public Storage ended the third quarter of 2018 with $432.5 million in cash and cash equivalents, a slight decrease from the $433.4 million reported at the end of the prior year.

Shurgard Europe Update

On October 15, Shurgard Europe completed its initial public offering. Its shares began trading on Euronext Brussels under the symbol “SHUR”.

As a result of this offering, Public Storage’s capital share, consisting of direct and indirect pro-rata shares in 31.3 million shares, decreased from 49% to 36.6% (35.2% assuming a green shoe). Therefore, even without the share sale, the company will record a profit on the sale in the current quarter, which will be as if the company had sold a proportionate part of its investment in Shurgard Europe.

Additionally, on July 13, 2018, the Company received a cash payment of USD 145.4 million from Shurgard Europe.

How have estimates changed since then?

It turns out that the fresh estimates have not changed over the last month.

VGM Results

At the moment, the public magazine has a weak Growth score of D, but its Momentum score is doing much better at B. However, the stock is assigned a D rating on the Value side, placing it in the bottom 40% for this investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on a single strategy, this score should interest you.

Perspectives

The public stock carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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