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Extra Space Storage Stock Rallies 10.5% YTD: Will It Rise Further?
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Shares of Extra Space Storage (EXR - Free Report) have risen 10.5% year to date, outperforming the industry's growth of 9%.
Extra Space Storage is well-poised to gain from its high brand value, geographically diversified portfolio and presence in key cities in the United States. The self-storage industry’s need-based and recession-resilient nature shields it from market volatility and assures stable revenues. Extra Space Storage’s focus on accretive buyouts, mutually beneficial joint venture partnerships and third-party management services bode well for long-term growth.
Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share being raised marginally upward over the past two months to $8.07.
Image Source: Zacks Investment Research
Factors Behind EXR Stock Price Surge: Will the Trend Last?
Extra Space Storage is a notable name in the self-storage industry.The company's stores comprised around 2.6 million units and around 292 million rentable square feet of space as of June 30, 2024. The majority of its stores are close to large population centers where people have higher incomes. With a geographically diversified portfolio and significant scale, the company is poised for long-term growth. We expect a year-over-year rise of 27.1% in EXR’s total revenues in 2024.
EXR has focused on consistently growing its business and achieving geographical diversity through accretive acquisitions, mutually beneficial joint venture partnerships and third-party management services. In the first half of 2024, the company acquired seven operating stores and two stores after construction. In association with the JV partner, it completed three developments. The company is also making strategic investments through other channels in the storage sector, including preferred equity investments and a bridge loan program.
The self-storage asset category is need-based and recession-resilient in nature. This asset class has low capital expenditure requirements and generates high operating margins. The self-storage industry continues to benefit from favorable demographic changes. For 2024, we estimate year-over-year growth of 25.9% in property rental revenues.
Extra Space Storage is focused on improving its balance sheet, reducing secured debt and increasing the size of its unencumbered pool. As of June 30, 2024, the company's percentage of fixed-rate debt to total debt was 75%, and the net debt to EBITDA was 4.8X. The combined weighted average interest rate was 4.6%, with a weighted average maturity of around 4.7 years. The percentage of unencumbered asset value to total asset value was 84.7%. With solid balance sheet strength, EXR is well poised to capitalize on external growth opportunities.
Solid dividend payouts are arguably the biggest enticements for REIT investors, and Extra Space Storage remains committed to increasing shareholders’ wealth. In the past five years, the company has increased its dividend six times, and the five-year annualized dividend growth rate is 13.56%. With a robust operating platform, a healthy financial position and our core FFO growth projections of 23.1%, we expect the dividend payout to be sustainable in the upcoming period.
Key Risks for EXR
Extra Space Storage operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. There has been a development boom of self-storage units in many markets in recent years. This high supply has fueled competition, affecting its power to raise rents and turn on more discounting. As such, the reacceleration in revenue growth is expected to be challenging until the company regains pricing power with new customers.
The Zacks Consensus Estimate for Centerspace’s current-year FFO per share has been raised marginally over the past two months to $4.83.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has moved marginally northward over the past month to $2.67.
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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Extra Space Storage Stock Rallies 10.5% YTD: Will It Rise Further?
Shares of Extra Space Storage (EXR - Free Report) have risen 10.5% year to date, outperforming the industry's growth of 9%.
Extra Space Storage is well-poised to gain from its high brand value, geographically diversified portfolio and presence in key cities in the United States. The self-storage industry’s need-based and recession-resilient nature shields it from market volatility and assures stable revenues. Extra Space Storage’s focus on accretive buyouts, mutually beneficial joint venture partnerships and third-party management services bode well for long-term growth.
Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share being raised marginally upward over the past two months to $8.07.
Image Source: Zacks Investment Research
Factors Behind EXR Stock Price Surge: Will the Trend Last?
Extra Space Storage is a notable name in the self-storage industry.The company's stores comprised around 2.6 million units and around 292 million rentable square feet of space as of June 30, 2024. The majority of its stores are close to large population centers where people have higher incomes. With a geographically diversified portfolio and significant scale, the company is poised for long-term growth. We expect a year-over-year rise of 27.1% in EXR’s total revenues in 2024.
EXR has focused on consistently growing its business and achieving geographical diversity through accretive acquisitions, mutually beneficial joint venture partnerships and third-party management services. In the first half of 2024, the company acquired seven operating stores and two stores after construction. In association with the JV partner, it completed three developments. The company is also making strategic investments through other channels in the storage sector, including preferred equity investments and a bridge loan program.
The self-storage asset category is need-based and recession-resilient in nature. This asset class has low capital expenditure requirements and generates high operating margins. The self-storage industry continues to benefit from favorable demographic changes. For 2024, we estimate year-over-year growth of 25.9% in property rental revenues.
Extra Space Storage is focused on improving its balance sheet, reducing secured debt and increasing the size of its unencumbered pool. As of June 30, 2024, the company's percentage of fixed-rate debt to total debt was 75%, and the net debt to EBITDA was 4.8X. The combined weighted average interest rate was 4.6%, with a weighted average maturity of around 4.7 years. The percentage of unencumbered asset value to total asset value was 84.7%. With solid balance sheet strength, EXR is well poised to capitalize on external growth opportunities.
Solid dividend payouts are arguably the biggest enticements for REIT investors, and Extra Space Storage remains committed to increasing shareholders’ wealth. In the past five years, the company has increased its dividend six times, and the five-year annualized dividend growth rate is 13.56%. With a robust operating platform, a healthy financial position and our core FFO growth projections of 23.1%, we expect the dividend payout to be sustainable in the upcoming period.
Key Risks for EXR
Extra Space Storage operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. There has been a development boom of self-storage units in many markets in recent years. This high supply has fueled competition, affecting its power to raise rents and turn on more discounting. As such, the reacceleration in revenue growth is expected to be challenging until the company regains pricing power with new customers.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Centerspace (CSR - Free Report) and Cousins Properties (CUZ - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Centerspace’s current-year FFO per share has been raised marginally over the past two months to $4.83.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share has moved marginally northward over the past month to $2.67.
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.