It has been about a month since the last earnings report for Public Storage (PSA Quick QuotePSA - Free Report) . Shares have added about 5.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Public Storage due for a pullback? 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 drivers.

Public Storage Q3 FFO & Revenues Top Estimates, View Up

Public Storage's third-quarter 2022 core FFO per share of $4.13 surpassed the Zacks Consensus Estimate of $4.05. The figure also increased 20.8% year over year.

Quarterly revenues of $1.09 billion exceeded the Zacks Consensus Estimate of $1.07 billion. Moreover, revenues increased 21.6% year over year.

Results reflect better-than-anticipated top-line growth alongside an improvement in the realized annual rent per occupied square foot. The company also benefited from its expansion efforts through acquisitions, developments and extensions. It raised its guidance for 2022 FFO per share.
 
After PSB’s merger with Blackstone on Jul 20, 2022, PSA received a total of $2.7 billion of cash proceeds from the sale of its equity investment in PSB. The transaction resulted in a gain of $2.1 billion.

Behind the Headlines

Public Storage’s same-store revenues increased 14.7% year over year to $822.5 million in the third quarter, highlighting the higher realized annual rent per occupied square foot, partially offset by a decline in occupancy. This REIT experienced a 17.2% increase in the realized annual rental income per occupied square foot to $22.52. However, the weighted-average square foot occupancy of 94.5% was down 2.4% year over year.

The same-store cost of operations increased 7.7% year over year, mainly reflecting a rise in property tax expense, marketing expense, other direct property costs and centralized management costs.

Consequently, PSA’s same-store net operating income (NOI) increased 17% to $632.6 million. Also, this REIT’s NOI growth from non-same-store facilities was $56.5 million due to the facilities acquired in 2021 and the fill-up of recently developed and expanded facilities.

Public Storage achieved an 80.3% same-store direct NOI margin in the quarter, reflecting an increase of 1.6% year over year.

Portfolio Activity

In the September quarter, Public Storage acquired 24 self-storage facilities comprising 1.7 million net rentable square feet of area for $250.6 million. Following Sep 30, 2022, the company acquired or was under contract to buy 33 self-storage facilities spanning 1.7 million net rentable square feet of space across six states for $262.6 million.

In the third quarter, this REIT opened five newly developed facilities and completed several expansion projects with 0.5 million net rentable square feet costing $69.7 million.

As of Sep 30, 2022, PSA had several facilities in development (2.1 million net rentable square feet) with an estimated cost of $421 million and several expansion projects (3.0 million net rentable square feet) worth $590.9 million. It expects to incur the remaining $605.5 million of development costs related to these projects, mainly over the next 18 to 24 months.

Balance Sheet Position

Public Storage exited third-quarter 2022 with $883.8 million of cash and equivalents, down from $1.01 billion as of Jun 30, 2022.

2022 Guidance Up

Public Storage increased its guidance for 2022 core FFO per share after including the impact of the sale of its investment in PSB.

It now projects the same in the range of $15.35-$15.75, up from the prior guidance of $15.00-$15.70.

The company’s full-year assumption is backed by 13.5-15% growth in same-store revenues, a 6% to 8% rise in same-store expenses and a 15.4% to 18.0% expansion in same-store NOI. Further, the company expects $800 million in acquisitions and $250 million in development openings.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Public Storage has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Public Storage has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Public Storage belongs to the Zacks REIT and Equity Trust - Other industry. Another stock from the same industry, Highwoods Properties (HIW Quick QuoteHIW - Free Report) , has gained 6.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Highwoods Properties reported revenues of $207 million in the last reported quarter, representing a year-over-year change of +5.9%. EPS of $0.36 for the same period compares with $0.96 a year ago.

Highwoods Properties is expected to post earnings of $0.97 per share for the current quarter, representing no change from the year-ago quarter. Over the last 30 days, the Zacks Consensus Estimate has changed +0.6%.

Highwoods Properties has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.