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What's in Store for Public Storage (PSA) in Q4 Earnings?
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Public Storage (PSA - Free Report) is slated to release fourth-quarter and full-year 2023 results on Feb 20 after market close. While its quarterly revenues are expected to have witnessed a year-over-year increase, core funds from operations (FFO) per share might display a decline.
In the last reported quarter, this self-storage real estate investment trust (REIT) delivered a surprise of 2.85% in terms of core FFO per share. Results reflected a better-than-anticipated top line. The company also benefited from its expansion efforts through acquisitions, developments and extensions.
Over the last four quarters, Public Storage surpassed the Zacks Consensus Estimate on all occasions, the average beat being 2.32%. The graph below depicts the surprise history of the company:
Let’s see how things have shaped up before this announcement.
Key Factors
Public Storage is expected to have continued enjoying the advantages of its strong foothold in major urban centers, well-established brand reputation and technological edge in the fourth quarter. Additionally, PSA is likely to have maintained a robust financial position.
Public Storage has one of the strongest balance sheets in the sector, with adequate liquidity to bank on expansion opportunities through acquisitions and developments. This is likely to have continued in the fourth quarter as well.
From the beginning of 2021 through Sep 30, 2023, the company acquired 459 facilities with 38 million net rentable square feet for $8.3 billion. Particularly, in September 2023, it acquired Simply Self Storage from BREIT for $2.2 billion. Such acquisition and expansion initiatives are anticipated to have stoked the company’s growth during the period under consideration.
Amid these, Public Storage is likely to have seen growth in revenues in the quarter to be reported. The Zacks Consensus Estimate for quarterly revenues stands at $1.14 billion. This calls for a 4.53% year-over-year increase.
The Zacks Consensus Estimate for fourth-quarter revenues from self-storage facilities stands at $1.065 billion. This suggests an increase from the $1.028 billion witnessed in the year-ago period. Quarterly revenues from ancillary operations are presently projected at $64.03 million, ahead of the $60.19 million registered in the comparable period last year.
However, with tenants reverting to more normal move-out behavior as the pandemic’s impact abates, there is upward pressure on vacate trends. This is likely to limit rental rate growth in many markets. Weaker industry-wide demand in a soft macroeconomic environment and more limited home-moving activities are likely to have acted as dampeners.
Consequently, same-store revenues are likely to be affected, and we estimate a 3.1% decline in this metric in the fourth quarter. Also, we project 2023 weighted average square foot occupancy to be 93.1%, down from 94.9% recorded at the end of 2022.
Also, high interest rates add to its woes. We estimate a significant year-over-year increase in interest expenses in the fourth quarter.
PSA’s activities during the quarter under review were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the fourth-quarter core FFO per share has been revised a cent south to $4.15 in the past month. It also calls for a 0.24% year-over-year decline.
For the full year 2023, Public Storage projected core FFO per share in the range of $16.60-$16.85. This is based on the company’s expectations for same-store revenue growth of 4-4.75% and same-store expense increase of 5-6.5%. Consequently, same-store NOI is expected to be 3.2-4.7%.
For the full year, the Zacks Consensus Estimate for core FFO per share has been revised a cent upward to $16.83 over the past month, indicating a 5.72% increase from the year-ago reported figure. The Zacks Consensus Estimate for 2023 revenues is pegged at $4.50 billion, calling for an increase of 7.51% from the year-ago reported number.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Public Storage this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
PSA currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.93%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Extra Space Storage Inc. (EXR - Free Report) and American Homes 4 Rent (AMH - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
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.
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What's in Store for Public Storage (PSA) in Q4 Earnings?
Public Storage (PSA - Free Report) is slated to release fourth-quarter and full-year 2023 results on Feb 20 after market close. While its quarterly revenues are expected to have witnessed a year-over-year increase, core funds from operations (FFO) per share might display a decline.
In the last reported quarter, this self-storage real estate investment trust (REIT) delivered a surprise of 2.85% in terms of core FFO per share. Results reflected a better-than-anticipated top line. The company also benefited from its expansion efforts through acquisitions, developments and extensions.
Over the last four quarters, Public Storage surpassed the Zacks Consensus Estimate on all occasions, the average beat being 2.32%. The graph below depicts the surprise history of the company:
Public Storage Price and EPS Surprise
Public Storage price-eps-surprise | Public Storage Quote
Let’s see how things have shaped up before this announcement.
Key Factors
Public Storage is expected to have continued enjoying the advantages of its strong foothold in major urban centers, well-established brand reputation and technological edge in the fourth quarter. Additionally, PSA is likely to have maintained a robust financial position.
Public Storage has one of the strongest balance sheets in the sector, with adequate liquidity to bank on expansion opportunities through acquisitions and developments. This is likely to have continued in the fourth quarter as well.
From the beginning of 2021 through Sep 30, 2023, the company acquired 459 facilities with 38 million net rentable square feet for $8.3 billion. Particularly, in September 2023, it acquired Simply Self Storage from BREIT for $2.2 billion. Such acquisition and expansion initiatives are anticipated to have stoked the company’s growth during the period under consideration.
Amid these, Public Storage is likely to have seen growth in revenues in the quarter to be reported. The Zacks Consensus Estimate for quarterly revenues stands at $1.14 billion. This calls for a 4.53% year-over-year increase.
The Zacks Consensus Estimate for fourth-quarter revenues from self-storage facilities stands at $1.065 billion. This suggests an increase from the $1.028 billion witnessed in the year-ago period. Quarterly revenues from ancillary operations are presently projected at $64.03 million, ahead of the $60.19 million registered in the comparable period last year.
However, with tenants reverting to more normal move-out behavior as the pandemic’s impact abates, there is upward pressure on vacate trends. This is likely to limit rental rate growth in many markets. Weaker industry-wide demand in a soft macroeconomic environment and more limited home-moving activities are likely to have acted as dampeners.
Consequently, same-store revenues are likely to be affected, and we estimate a 3.1% decline in this metric in the fourth quarter. Also, we project 2023 weighted average square foot occupancy to be 93.1%, down from 94.9% recorded at the end of 2022.
Also, high interest rates add to its woes. We estimate a significant year-over-year increase in interest expenses in the fourth quarter.
PSA’s activities during the quarter under review were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the fourth-quarter core FFO per share has been revised a cent south to $4.15 in the past month. It also calls for a 0.24% year-over-year decline.
For the full year 2023, Public Storage projected core FFO per share in the range of $16.60-$16.85. This is based on the company’s expectations for same-store revenue growth of 4-4.75% and same-store expense increase of 5-6.5%. Consequently, same-store NOI is expected to be 3.2-4.7%.
For the full year, the Zacks Consensus Estimate for core FFO per share has been revised a cent upward to $16.83 over the past month, indicating a 5.72% increase from the year-ago reported figure. The Zacks Consensus Estimate for 2023 revenues is pegged at $4.50 billion, calling for an increase of 7.51% from the year-ago reported number.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Public Storage this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
PSA currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.93%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — Extra Space Storage Inc. (EXR - Free Report) and American Homes 4 Rent (AMH - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Extra Space Storage, scheduled to report quarterly numbers on Feb 27, has an Earnings ESP of +1.08% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Homes 4 Rent, slated to release quarterly numbers on Feb 22, has an Earnings ESP of +1.68% and carries a Zacks Rank of 3 at present.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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.