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4 Reasons to Buy Extra Space Storage (EXR) Stock Right Now
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Extra Space Storage Inc. (EXR - Free Report) has earned a solid recognition in the self-storage industry. The company has been putting in efforts to grow its business and achieve geographical diversity through accretive acquisitions, mutually beneficial joint-venture partnerships and third-party management services. It enjoys solid presence in key cities and opts for strategic joint ventures to drive long-term profitability.
Also, shares of Extra Space Storage have outperformed its industry in six months’ time. The company’s shares have rallied 20%, while the industry has gained 7.1%.
Currently, the trend in estimate revisions for 2021 funds from operations (“FFO”) per share indicates a favorable outlook for this self-storage real estate investment trust (“REIT”). The Zacks Consensus Estimate for the current-year FFO per share has been revised 2.2% upward to $5.97 over the past week.
In fact, its projected FFO per share growth rate for the current year of 13.07% is ahead of the industry average of 7.30%. This Zacks Rank #2 (Buy) stock is likely to rally further in the near term on a number of favorable factors.
Let’s explore what makes it a solid choice:
Expansion Efforts: Extra Space Storage significantly expanded its business in recent years, growing its branded-store count from 820 in 2010 to 1,921 at the end of 2020. Also, total stores managed for third-party owners increased from 160 to 724 over the same period. In addition to acquisitions, the company is making strategic investments through other channels in the storage sector, including preferred equity investments and bridge loan program.
Particularly, even amid the challenges during fourth-quarter 2020, the company completed two preferred equity investments aggregating $350 million, spent $147 million in acquisitions and $168 million in bridge loan closings, and added 44 stores to its management platform. Management also noted that the company had already added 51 third-party management stores in 2021 and that its acquisition, management and bridge loan pipelines are strong. In fact, the company’s 2021 guidance assumes $350 million in Extra Space investment, roughly $180 million of which is closed or under contract.
The company gained an increased scale in several core markets on these acquisitions as well as fortified its presence in a number of new markets. These efforts have helped this Salt Lake City, UT-based self-storage REIT emerge as the second largest self-storage owner and/or operator and the largest self-storage management company in the United States. With focus on both primary and secondary markets, the company remains well poised to capitalize on favorable trends.
Furthermore, the industry is characterized by fragmented ownership and only around 30% of the total self-storage square footage is under REIT’s ownership with Public Storage (PSA - Free Report) and Extra Space Storage enjoying notable shares of the market. This creates ample scope for consolidation at some level in the future, and with a solid scale, decent balance sheet strength and technology advantage, Extra Space Storage remains well poised to compete for acquisitions.
Healthy Asset Fundamentals: The self-storage asset category is basically need-based and recession-resilient in nature. This asset class has low capital expenditure requirements and generates high operating margins. Additionally, the self-storage industry continues to benefit from favorable demographic changes. Specifically, migration and downsizing trend, and increase in the number of people renting homes have escalated the needs of consumers to rent space at a storage facility to park their possessions.
Further, demand for self-storage space has increased amid the flexible working environment as well as improving housing market, while move-outs remain low amid the health crisis, resulting in improved year-over-year occupancy trends. In fact, rentals continue to be steady while vacates continue to be muted. With this landscape, for 2021, the company expects same-store revenues to increase 4.25-5.5%, driven by higher occupancy in the first half of the year and elevated rates to new and existing customers.
Balance Sheet Strength and High ROE: Extra Space Storage is focused on improving its balance sheet. The REIT exited 2020 with $109.1 million of cash and cash equivalents, up from the $65.7 million recorded at the end of 2019. Notably, as of Dec 31, 2020, the company's percentage of fixed-rate debt to total debt was 63.1%. The company had $126.1 million available for issuance under its at the market program as of Feb 22, 2021.The company made efforts to deleverage its balance sheet. In January 2021, Moody's Investors Service has assigned a Baa2 issuer credit rating with a stable outlook to its operating partnership subsidiary. This second investment grade credit rating renders the company favorable access to debt market. With solid balance-sheet strength, the company remains well poised to capitalize on external growth opportunities which will likely increase going forward.
Further, Extra Space Storage’s Return on Equity or ROE is 18.16%, compared with the industry’s average of 2.98%. This reflects that the company reinvests more efficiently compared to the industry.
Dividend Payouts: Solid dividend payouts are arguably the biggest enticement for REIT investors and Extra Space Storage remains committed to increasing shareholders’ wealth. On Feb 18, it announced a first-quarter dividend of $1.00, reflecting an 11.1% increase from the prior quarter. The dividend will be paid on Mar 31, to stockholders of record at the close of business on Mar 15, 2021. The company has achieved a five-year total increase of 69.5% in dividend. Such shareholder-friendly efforts are encouraging.
Global Net Lease, Inc. (GNL - Free Report) has a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2021 FFO per share has been revised 4% at $2.10 in a month’s time.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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4 Reasons to Buy Extra Space Storage (EXR) Stock Right Now
Extra Space Storage Inc. (EXR - Free Report) has earned a solid recognition in the self-storage industry. The company has been putting in efforts to grow its business and achieve geographical diversity through accretive acquisitions, mutually beneficial joint-venture partnerships and third-party management services. It enjoys solid presence in key cities and opts for strategic joint ventures to drive long-term profitability.
Also, shares of Extra Space Storage have outperformed its industry in six months’ time. The company’s shares have rallied 20%, while the industry has gained 7.1%.
Currently, the trend in estimate revisions for 2021 funds from operations (“FFO”) per share indicates a favorable outlook for this self-storage real estate investment trust (“REIT”). The Zacks Consensus Estimate for the current-year FFO per share has been revised 2.2% upward to $5.97 over the past week.
In fact, its projected FFO per share growth rate for the current year of 13.07% is ahead of the industry average of 7.30%. This Zacks Rank #2 (Buy) stock is likely to rally further in the near term on a number of favorable factors.
Let’s explore what makes it a solid choice:
Expansion Efforts: Extra Space Storage significantly expanded its business in recent years, growing its branded-store count from 820 in 2010 to 1,921 at the end of 2020. Also, total stores managed for third-party owners increased from 160 to 724 over the same period. In addition to acquisitions, the company is making strategic investments through other channels in the storage sector, including preferred equity investments and bridge loan program.
Particularly, even amid the challenges during fourth-quarter 2020, the company completed two preferred equity investments aggregating $350 million, spent $147 million in acquisitions and $168 million in bridge loan closings, and added 44 stores to its management platform. Management also noted that the company had already added 51 third-party management stores in 2021 and that its acquisition, management and bridge loan pipelines are strong. In fact, the company’s 2021 guidance assumes $350 million in Extra Space investment, roughly $180 million of which is closed or under contract.
The company gained an increased scale in several core markets on these acquisitions as well as fortified its presence in a number of new markets. These efforts have helped this Salt Lake City, UT-based self-storage REIT emerge as the second largest self-storage owner and/or operator and the largest self-storage management company in the United States. With focus on both primary and secondary markets, the company remains well poised to capitalize on favorable trends.
Furthermore, the industry is characterized by fragmented ownership and only around 30% of the total self-storage square footage is under REIT’s ownership with Public Storage (PSA - Free Report) and Extra Space Storage enjoying notable shares of the market. This creates ample scope for consolidation at some level in the future, and with a solid scale, decent balance sheet strength and technology advantage, Extra Space Storage remains well poised to compete for acquisitions.
Healthy Asset Fundamentals: The self-storage asset category is basically need-based and recession-resilient in nature. This asset class has low capital expenditure requirements and generates high operating margins. Additionally, the self-storage industry continues to benefit from favorable demographic changes. Specifically, migration and downsizing trend, and increase in the number of people renting homes have escalated the needs of consumers to rent space at a storage facility to park their possessions.
Further, demand for self-storage space has increased amid the flexible working environment as well as improving housing market, while move-outs remain low amid the health crisis, resulting in improved year-over-year occupancy trends. In fact, rentals continue to be steady while vacates continue to be muted. With this landscape, for 2021, the company expects same-store revenues to increase 4.25-5.5%, driven by higher occupancy in the first half of the year and elevated rates to new and existing customers.
Balance Sheet Strength and High ROE: Extra Space Storage is focused on improving its balance sheet. The REIT exited 2020 with $109.1 million of cash and cash equivalents, up from the $65.7 million recorded at the end of 2019. Notably, as of Dec 31, 2020, the company's percentage of fixed-rate debt to total debt was 63.1%. The company had $126.1 million available for issuance under its at the market program as of Feb 22, 2021.The company made efforts to deleverage its balance sheet. In January 2021, Moody's Investors Service has assigned a Baa2 issuer credit rating with a stable outlook to its operating partnership subsidiary. This second investment grade credit rating renders the company favorable access to debt market. With solid balance-sheet strength, the company remains well poised to capitalize on external growth opportunities which will likely increase going forward.
Further, Extra Space Storage’s Return on Equity or ROE is 18.16%, compared with the industry’s average of 2.98%. This reflects that the company reinvests more efficiently compared to the industry.
Dividend Payouts: Solid dividend payouts are arguably the biggest enticement for REIT investors and Extra Space Storage remains committed to increasing shareholders’ wealth. On Feb 18, it announced a first-quarter dividend of $1.00, reflecting an 11.1% increase from the prior quarter. The dividend will be paid on Mar 31, to stockholders of record at the close of business on Mar 15, 2021. The company has achieved a five-year total increase of 69.5% in dividend. Such shareholder-friendly efforts are encouraging.
Other Key Picks
Alpine Income Property Trust, Inc.’s (PINE - Free Report) FFO per share estimates for the current year have moved up 3.9% to $1.61 in the past week. The company sports a Zacks Rank of 1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global Net Lease, Inc. (GNL - Free Report) has a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2021 FFO per share has been revised 4% at $2.10 in a month’s time.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
AccessZacks Top 10 Stocks for 2021 today >>