Public Storage ( PSA - Analyst Report ) is anticipated to beat expectations while reporting its fourth-quarter 2012 results on Thursday, Feb 21 with an earnings call scheduled the next day.

Why a Likely Positive Surprise?

Our proven model shows that Public Storage is likely to beat earnings since it has an appropriate combination of the following 2 key ingredients:

Positive Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +0.57%. This indicates a likely positive earnings surprise.

Zacks Rank #3 (Hold): This increases the predictive power of its ESP. The combination of its Zacks Rank and Earnings ESP assures us of a positive earnings surprise in the to-be-reported quarter.

Stocks with Zacks Ranks of #1, #2 and #3 have significantly higher chances of beating the earnings estimates. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.

Key Drivers

Public Storage is well poised to maintain its growth curve backed by its robust presence in all the major markets in the U.S. It is the leading owner and operator of storage facilities in the U.S. and has significantly increased the scale and scope of its operations through the acquisition of Shurgard Storage Centers that has a considerable presence in the European markets.

It also owns a 41% common equity interest in PS Business Parks Inc. ( PSB - Analyst Report ) , which owns and operates commercial space, primarily flex, multi-tenant office and industrial space. In addition, the storage facilities of the company have a high visibility and are usually located in heavily populated areas that enhance the local awareness of the brand.

This provides a significant upside potential for the company and we expect the size and scope of its operations to enable it to achieve economies of scale, thereby generating high operating margins in the fourth quarter.

Moreover, Public Storage has one of the strongest balance sheets in the sector and has been making concerted efforts towards increasing shareholders wealth. Accordingly, it hiked its dividend by nearly 16% in the first half of 2012. The current dividend rate affirms an annual yield of 2.91%.

We further expect a dividend hike in the first half of 2013 as we anticipate a better-than-expected performance at this REIT. Notably, a number of other REITs including AvalonBay Communities Inc. ( AVB - Analyst Report ) have increased their dividend recently.

Other Stock to Consider

Here is another REIT that you may want to consider, as our model shows it has the right combination of elements to post an earnings beat this season:

Host Hotels & Resorts Inc. ( HST - Analyst Report ) has an Earnings ESP of +5.41% and carries a Zacks Rank #3. The company is scheduled to report its fourth-quarter 2012 earnings on Feb 21, before the opening bell.