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Shares of Public Storage (PSA - Analyst Report), a leading real estate investment trust (REIT) operating self-storage facilities, touched a 52-week high of $158.55 on Wednesday, Apr 10, 2013, as it gained momentum from better-than-expected fourth-quarter 2012 results. The closing price of this REIT on Apr 10, 2013 was $157.09, representing a year-to-date return of 8.4%. The average trading volume over the last 3 months was nearly 0.4 million shares.

Despite hitting its 52-week high, this Zacks Rank #3 (Hold) stock has plenty of upside left given its strong estimate revisions over the last 60 days.

Growth Drivers

Public Storage reported strong fourth-quarter 2012 results with its FFO (funds from operations) per share substantially surpassing the Zacks Consensus Estimate. We believe that the company is well poised to maintain its growth curve backed by its robust presence in all major U.S. markets.

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 enjoys considerable presence in the European markets.

Public Storage also possesses 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 high visibility and are usually located in heavily populated areas that enhance the local awareness of the brand.

This provides a significant upside potential to 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. However, the demand for storage facilities has relatively lessened as customers have trimmed down their discretionary spending, which remains our concern.

On Feb 21, Public Storage reported adjusted FFO of $1.86 per share, well ahead of the Zacks Consensus Estimate of $1.76 per share and prior-year quarter figure of $1.66 per share. For full year 2012, Public Storage’s adjusted FFO reached $6.68 per share, exceeding the Zacks Consensus Estimate of $6.24 per share and the prior-year figure of $5.93 per share.

The surge in FFO per share was primarily due to improved property operations and impact of foreign currency translations. The company also announced a 14% hike in its quarterly dividend rate.

Estimate Revisions

Over the last 60 days, the Zacks Consensus Estimate for full-year 2013 moved up 1.0% to $7.15 per share with 9 out of 15 estimates moving north. Also, the Zacks Consensus Estimate for full-year 2014 climbed 1.7% to $7.63 per share, driven by 5 positive estimate revisions.

Of late, a number of REIT stocks achieved 52-week highs. These include Kimco Realty Corp. (KIM - Analyst Report) and Ventas Inc. (VTR - Analyst Report).

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

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