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Extra Space Storage (EXR) Down 16.3% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Extra Space Storage (EXR - Free Report) . Shares have lost about 16.3% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Extra Space Storage due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Extra Space Storage Q4 FFO & Revenues Beat Estimates

Extra Space Storage’s fourth-quarter 2019 core FFO per share of $1.27 outpaced the Zacks Consensus Estimate of $1.25. The figure also came in 4.1% higher than the prior-year quarter reported tally of $1.22.

Results reflect growth in same-store revenues on higher occupancy and net rental rates for customers amid headwinds from new supply. However, the company witnessed rise in payroll, marketing expenses, repairs and maintenance and property taxes in the quarter.

Quarterly revenues came in at $335.8 million, climbing 9.3% year over year. The revenue figure also surpassed the Zacks Consensus Estimate of $335.3 million.

For full-year 2019, the company recorded core FFO per share of $4.88, up 4.5% from the prior-year tally of $4.67. The reported figure also beat the Zacks Consensus Estimate of $4.86.  The company generated revenues of $1.31 billion for the year, up 9.3% year on year. The revenue figure also surpassed the Zacks Consensus Estimate of $1.3 billion.

Behind the Headlines

Same-store rental revenues increased 2.5% year over year to $259.5 million during the fourth quarter, while same-store NOI was up 1% to $187.1 million. This upswing in same-store revenues stemmed from higher occupancy and net rental rates for customers. Same-store square foot occupancy was 92.4% as of Dec 31, 2019, up 70 basis points year on year.

Notably, during the reported quarter, Chicago, Las Vegas, Memphis,Norfolk/Virginia Beach, Oklahoma City and Phoenix were the major markets, which registered revenue growth above the company's portfolio average.

Nonetheless, markets, including Charleston, Denver, Houston, Miami, Tampa and West Palm Beach/Boca Raton, performed below the company's portfolio average.

Portfolio Activity

During the final quarter of 2019, the company acquired five operating stores for $50.9 million. Moreover, in conjunction with its joint-venture partners, the company purchased three stores at the completion of construction, for a total cost of roughly $60 million. Of this, the company invested $18.1 million.

Extra Space Storage added 41 stores (gross) to the company’s third-party management platform. As of Dec 31, 2019, it managed 646 stores for third-party owners. Furthermore, with additional 246 stores owned in joint ventures, total stores under management summed 892.

Balance Sheet

Extra Space Storage exited fourth-quarter 2019, with $65.7 million of cash and cash equivalents, up from the $57.5 million recorded at the end of 2018. As of Dec 31, 2019, the company's percentage of fixed-rate debt to total debt was 78.7%.

During the December-end quarter, the company did not sell any shares of common stock using its ATM program. Extra Space Storage had $298.6 million available for issuance under its ATM program as of Dec 31, 2019.

Outlook

Extra Space Storage anticipates full-year 2020 core FFO per share of $4.99-$5.08. The company projects same-store revenue growth of 0.75-1.75%, same-store expense growth of 4-5% and same-store NOI growth of around -0.5 to 1% for the current year (excluding tenant reinsurance).

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Extra Space Storage has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, 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 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 this revision has been net zero. Notably, Extra Space Storage has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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