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Factors to Impact Extra Space Storage's (EXR) Q2 Earnings

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Extra Space Storage (EXR - Free Report) is slated to report second-quarter 2020 earnings on Aug 4, after the bell. The company’s quarterly results might display a decline in revenues and funds from operations (FFO) per share year on year.

In the last reported quarter, this Salt Lake City, UT-based self-storage real estate investment trust (REIT) delivered a positive surprise of 3.3% in terms of FFO per share. Results reflected growth in same-store revenues.

Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on three occasions and met in the other, the average surprise being 1.86%. The graph below depicts this surprise history:

Extra Space Storage Inc Price and EPS Surprise

Extra Space Storage Inc Price and EPS Surprise

Extra Space Storage Inc price-eps-surprise | Extra Space Storage Inc Quote

Let’s see how things have shaped up for this announcement.

Factors to Consider

In the second quarter, Extra Space Storage is likely to have benefited from its solid presence in key cities and concerted measures to boost the company’s geographical footprint through accretive acquisitions and third-party management.

However, the pandemic has been wreaking havoc and the self-storage market too has not been immune to the impacts of the outbreak. Lower walk-in traffic is likely to have affected rental activity and occupancy levels during the quarter under review. Same-store rental income and net operating income might have been hurt as well.

Moreover, the company operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. In addition, there is a development boom of self-storage units in several markets. This high supply is likely to have fueled competition, curbed its power to raise rents and turned on more discounting in the quarter under consideration.

Management and franchise fees for the quarter are projected at $14.74 million, indicating year-on-year growth of 19.6%. However, the Zacks Consensus Estimate of $277 million for quarterly property rental revenues suggests a decline of 1.1% year on year. The Zacks Consensus Estimate for second-quarter revenues of $322.3 million calls for a 0.4% decline year on year.

Moreover, Extra Space Storage’s activities during the quarter were inadequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has been revised 1.7% downward to $1.16 in a month’s time. It also calls for a 4.9% year-over-year decline.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Extra Space this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Extra Space currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of +2.01%.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these too have the right combination of elements to report a positive surprise this quarter:

Healthcare Trust of America, Inc. , set to report quarterly numbers on Aug 6, currently has an Earnings ESP of +0.96% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

SBA Communications Corporation (SBAC - Free Report) , slated to release results on Aug 3, has an Earnings ESP of +4.48% and carries a Zacks Rank of 3, at present.

National Storage Affiliates Trust (NSA - Free Report) , scheduled to announce earnings figures on Aug 6, has an Earnings ESP of +0.44% and holds a Zacks Rank of 3 currently.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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SBA Communications Corporation (SBAC) - free report >>

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