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What's in Store for Public Storage (PSA) in Q2 Earnings?
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Public Storage (PSA - Free Report) is slated to release second-quarter 2024 results on Jul 30 after market close. While its quarterly revenues are expected to witness 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 negative surprise of 0.98% in terms of core FFO per share. Results reflected a rise in property tax expenses and marketing expenses, as well as higher interest expenses, which acted as spoilsports.
Over the last four quarters, Public Storage surpassed the Zacks Consensus Estimate on all three occasions and missed once, the average beat being 1.24%. 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 benefits of having a strong foothold in major urban areas, established brand recognition and technological superiority in the second quarter. PSA is also 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 second quarter as well.
From the beginning of 2022 through Mar 31, 2024, Public Storage acquired a total of 238 facilities with 16.8 million net rentable square feet for $3.4 billion. As of Mar 31, 2024, Public Storage had several facilities in development and expansion, which are expected to add 3.7 million net rentable square feet at an estimated cost of $783.0 million. 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 $1.18 billion. This calls for a 5.5% year-over-year increase.
The Zacks Consensus Estimate for second-quarter revenues from self-storage facilities stands at $1.10 billion. This suggests an increase from the $1.06 billion witnessed in the year-ago period. Quarterly revenues from ancillary operations are presently projected at $69.71 million, ahead of the $63.65 million registered in the comparable period last year.
However, the self-storage industry is continuing to experience a softening in demand and operating trends through 2023 and the first quarter of 2024, and this trend is expected to have continued in the second quarter. Particularly, the industry-wide demand from new customers for storage space as of Mar 31, 2024 was below the level of Mar 31, 2023. To lure tenants into such an environment, management continues to focus on lowering rental rates to new customers and increasing promotional discounting.
Consequently, same-store revenues are likely to be affected, and we estimate a 0.1% decrease in this metric in the second quarter. However, we project second-quarter 2024 weighted average square foot occupancy to be 92.4%, up from 92.1% recorded in the prior quarter.
Also, high interest rates add to its woes. We estimate a significant year-over-year increase in interest expenses in the second quarter.
PSA’s activities during the quarter under review were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter core FFO per share has been revised a cent south to $4.21 in the past week. It also calls for a 1.64% year-over-year decline.
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.
Public Storage currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of -0.86%. 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 — American Tower (AMT - Free Report) and Welltower (WELL - 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 Q2 Earnings?
Public Storage (PSA - Free Report) is slated to release second-quarter 2024 results on Jul 30 after market close. While its quarterly revenues are expected to witness 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 negative surprise of 0.98% in terms of core FFO per share. Results reflected a rise in property tax expenses and marketing expenses, as well as higher interest expenses, which acted as spoilsports.
Over the last four quarters, Public Storage surpassed the Zacks Consensus Estimate on all three occasions and missed once, the average beat being 1.24%. 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 benefits of having a strong foothold in major urban areas, established brand recognition and technological superiority in the second quarter. PSA is also 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 second quarter as well.
From the beginning of 2022 through Mar 31, 2024, Public Storage acquired a total of 238 facilities with 16.8 million net rentable square feet for $3.4 billion. As of Mar 31, 2024, Public Storage had several facilities in development and expansion, which are expected to add 3.7 million net rentable square feet at an estimated cost of $783.0 million. 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 $1.18 billion. This calls for a 5.5% year-over-year increase.
The Zacks Consensus Estimate for second-quarter revenues from self-storage facilities stands at $1.10 billion. This suggests an increase from the $1.06 billion witnessed in the year-ago period. Quarterly revenues from ancillary operations are presently projected at $69.71 million, ahead of the $63.65 million registered in the comparable period last year.
However, the self-storage industry is continuing to experience a softening in demand and operating trends through 2023 and the first quarter of 2024, and this trend is expected to have continued in the second quarter. Particularly, the industry-wide demand from new customers for storage space as of Mar 31, 2024 was below the level of Mar 31, 2023. To lure tenants into such an environment, management continues to focus on lowering rental rates to new customers and increasing promotional discounting.
Consequently, same-store revenues are likely to be affected, and we estimate a 0.1% decrease in this metric in the second quarter. However, we project second-quarter 2024 weighted average square foot occupancy to be 92.4%, up from 92.1% recorded in the prior quarter.
Also, high interest rates add to its woes. We estimate a significant year-over-year increase in interest expenses in the second quarter.
PSA’s activities during the quarter under review were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter core FFO per share has been revised a cent south to $4.21 in the past week. It also calls for a 1.64% year-over-year decline.
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.
Public Storage currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of -0.86%. 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 — American Tower (AMT - Free Report) and Welltower (WELL - 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.
American Tower, scheduled to report quarterly numbers on Jul 30, has an Earnings ESP of +0.71% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Welltower, scheduled to report quarterly numbers on Apr 29, has an Earnings ESP of +0.67% and carries a Zacks Rank of 3.
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.