Back to top

Image: Bigstock

Public Storage (PSA) Q2 FFO Lags Estimates on Rent & Cost Woes

Read MoreHide Full Article

Public Storage's (PSA - Free Report) second-quarter 2020 core funds from operations (FFO) per share of $2.46 slipped 6.8% from the prior-year quarter’s $2.64. The reported figure also missed the Zacks Consensus Estimate of $2.52.

Quarterly revenues of $709.3 million edged down 0.2% year on year. However, the top-line figure surpassed the Zacks Consensus Estimate of $704.9 million.

The company’s quarterly results reflect the unfavorable impact of lower realized annual rent per occupied square foot, reduced late charges and administrative fees, as well as rise in on-site property manager payroll and elevated marketing expenses. Nevertheless, Public Storage benefited from its expansion efforts during this period.

Behind the Headlines

Same-store revenues declined 3% year over year to $597.4 million during the second quarter. This downside primarily resulted from a 2% decrease in realized annual rent per occupied square foot to $17.10, along with reduced late charges and administrative fees. Yet, weighted-average square foot occupancy of 94.2% expanded 20 basis points year over year.

Same-store cost of operations rose 6.7% year over year to $183.4 million, mainly reflecting a 20.7% increase in on-site property manager payroll and 36.9% rise in marketing expenses. Consequently, the company’s same-store net operating income (NOI) dropped 6.8% to $414 million.

Nonetheless, the company’s NOI from non-same store facilities increased on the back of the facilities acquired in 2019 and 2020, as well as the fill-up of the recently-developed and expanded facilities.

Portfolio Activity

During the June-end quarter, Public Storage acquired six self-storage facilities, comprising 0.4 million net rentable square feet of area, for $67.1 million. These included four facilities in Ohio, and one in California and Florida. Following Jun 30, 2020, the company acquired or was under contract to acquire five self-storage facilities, spanning 0.3 million net rentable square feet of space, for $33.3 million.

Finally, as of Jun 30, 2020, Public Storage had several facilities in development (1.1 million net rentable square feet), with an estimated cost of $195 million, as well as expansion projects (2.7 million net rentable square feet) worth $361 million. It expects to incur the remaining $403 million of development costs related to these projects, mainly over the next 18 to 24 months.

Balance Sheet Position

Public Storage exited second-quarter 2020 with $1.3 billion of cash and equivalents, up from the $409.7 million recorded at the end of 2019.

Dividend Update

On Aug 3, the company announced a regular quarterly dividend of $2 per common share. The dividend will be paid on Sep 30, to shareholders of record as of Sep 15, 2020.

Public Storage currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Public Storage Price, Consensus and EPS Surprise

Public Storage Price, Consensus and EPS Surprise

Public Storage price-consensus-eps-surprise-chart | Public Storage Quote

We, now, look forward to the earnings releases of other REITs like Kimco Realty Corporation (KIM - Free Report) , Ventas, Inc. (VTR - Free Report) and Simon Property Group, Inc. (SPG - Free Report) . While Kimco and Ventas are scheduled to release earnings on Aug 7, Simon Property will report on Aug 10.

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.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.

Click here for the 6 trades >>