It has been about a month since the last earnings report for Extra Space Storage (EXR Quick QuoteEXR - Free Report) . Shares have added about 15.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Extra Space 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 catalysts.

Extra Space Storage's Q3 FFO Lags, '23 View Revised

Extra Space Storage reported third-quarter 2023 core FFO per share of $2.02, missing the Zacks Consensus Estimate by a whisker. The figure declined 8.6% from the prior-year quarter.

The results reflected better-than-anticipated revenues despite a fall in occupancy. Higher interest expenses during the quarter were a spoilsport. The company revised its outlook for 2023.

Quarterly revenues of $748.03 million beat the Zacks Consensus Estimate of $522.24 million. The top line jumped nearly 50% year over year.

Per Joe Margolis, CEO of Extra Space Storage, “Operationally, we maintained strong same-store occupancy in the quarter, averaging 94.4%, and increased same-store revenue 1.9%.  We remain confident in the durable nature of self-storage and the strength of the Extra Space portfolio, which was enhanced through our recent merger with Life Storage.”

Quarter in Detail

Same-store revenues increased 1.9% year over year to $397.9 million in the third quarter. This uptick resulted from a rise in other operating income, partly muted by lower occupancy. Same-store expenses rose 5.7% year over year to $98.3 million, reflecting an increase in marketing, insurance, property taxes and office expenses.

Consequently, same-store net operating income increased marginally year over year to $299.6 million.

The same-store square-foot occupancy contracted 100 bps year over year to 94.1% as of Sep 30, 2023. Our estimate was pegged at 94.2%.

In the third quarter, interest expenses flared up to $122.9 million from $56.2 million a year ago.

Portfolio Activity

On Jul 20, 2023, Extra Space Storage closed its merger with Life Storage, Inc. in an all-stock transaction valued at $11.6 billion. The move added more than 1,200 stores to the company’s platform, enhancing its scale and diversifying its presence further.

During the July-September quarter, Extra Space Storage acquired three operating stores for around $18.5 million in addition to the stores acquired through the Life Storage Merger.

In association with JV partners, the company acquired two operating stores and one store at completion of construction for $44.3 million, of which it invested $10 million.

Extra Space Storage added 49 stores (43 stores net) to its third-party management platform in addition to the stores added through the Life Storage Merger. As of Sep 30, 2023, it managed 1,282 stores for third parties and 471 stores in unconsolidated JVs, with total stores under the management of 1,753.

Balance Sheet

Extra Space Storage exited the third quarter with $216.1 million of cash and cash equivalents, up from $50.6 million recorded as of Jun 30, 2023.

As of Sep 30, 2023, EXR's percentage of fixed-rate debt to total debt was 70.3%. The combined weighted average interest rate was 4.4%, with a weighted average maturity of around 4.7 years.

During the reported quarter, Extra Space Storage originated $78.8 million in mortgage and mezzanine bridge loans. It also sold $78.8 million in mortgage bridge loans.

In the third quarter, the company did not issue any shares under its at-the-market program and presently has $800 million available for issuance.  Also, it did not repurchase any shares of common stock and had the authorization to buy up to an additional $336.9 million under the plan as of Sep 30, 2023.

2023 Guidance Revised

Extra Space Storage revised its outlook for the current year, taking into account the impact of the Life Storage Merger.

It expects core FFO per share in the range of $8.05-$8.20, revised from the earlier guided range of $8.00-$8.25.

The full-year guidance is based on the assumption of 2.75-3.50% growth in same-store revenues compared with the prior range of 2.50-3.50% and a 4.0-5.0% increase in same-store expenses compared with the prior guidance of 3.5-4.5%. Consequently, same-store NOI growth is projected in the band of 2.25-3.25% compared with the previous outlook of 2.0-3.5%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

Currently, Extra Space Storage has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Extra Space 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

Extra Space Storage belongs to the Zacks REIT and Equity Trust - Other industry. Another stock from the same industry, Lamar Advertising (LAMR Quick QuoteLAMR - Free Report) , has gained 11.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Lamar reported revenues of $542.61 million in the last reported quarter, representing a year-over-year change of +2.9%. EPS of $1.37 for the same period compares with $2.03 a year ago.

Lamar is expected to post earnings of $1.95 per share for the current quarter, representing a year-over-year change of +2.1%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Lamar has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.