Back to top

Image: Shutterstock

Is it Wise to Hold On to PS Business Parks (PSB) Stock Now?

Read MoreHide Full Article

PS Business Parks Inc. (PSB - Free Report) has a well-diversified portfolio of multi-tenant industrial, flex and office assets across various markets. Also, its tenant roster is well diversified. This gives the company the ability to tap opportunities in different asset classes and helps mitigate the operating risks associated with a particular asset category or economic downturns in a specific region.

As of Jun 30, 2020, excluding assets held for sale, leases from the company’s top 10 customers comprised 9.4% of its annualized rental income, with only two customers, the U.S. Government (3.3%) and Luminex Corporation (1.1%), representing more than 1%.

In addition, with respect to industry concentration, 19.2% of the company’s annualized rental income comes in from business services, 12.2% from warehouse, distribution, transportation and logistics, and 11.5% from computer hardware, software and related services. None of the other industry group represents more than 10% of its annualized rental income.

Moreover, the industrial real estate market is witnessing improving fundamentals amid the e-commerce boom and supply-chain strategy transformations. There is a rising demand for warehouse space as companies are compelled to enhance and renovate their distribution and production platforms. Given the company’s well-positioned properties, it is well poised to benefit from this trend.

However, recovery in the industrial market has continued for long, and hence, growth in rent is expected to slow down in the days to come. Moreover, industrial real estate fundamentals, though seems more resilient than other asset categories, is not immune. For the second half of the year, there are concerns associated with the timing and nature of economies reopening. Thus, the pandemic’s adverse impact on the economy will likely affect demand for space in the near term. Hence, the company’s pricing power will be affected in the near term.

Furthermore, with the company’s portfolio having a concentration of small and mid-size customers, it is more susceptible to the pandemic’s adverse impact. The company, in fact, noted that the pandemic has had hurt many of its customers’ businesses.

Given the prevailing pandemic situation, and the rise in infection rates and possibilities of reinstitution of restrictions, the challenging environment will likely persist in the near term, and woes with rent collections with deferrals, abatements and defaults are expected to continue. Through Jul 31, 2020, 10.5% of its customers, based on total rental income, had been granted rent relief in the form of rent deferral and/or abatement.

Shares of this Zacks Rank #3 (Hold) company have gained 7.9% compared with the industry's rally of 11.8% over the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Omega Healthcare Investors, Inc.’s (OHI - Free Report) funds from operations (FFO) per share estimate for the ongoing year remained unchanged at $3.07 over the past month. The company currently carries a Zacks Rank of 2 (Buy).

Terreno Realty Corporation’s (TRNO - Free Report) FFO per share estimate for 2020 has been revised marginally upward to $1.43 over the past month. It currently carries a Zacks Rank of 2.

Duke Realty Corporation’s (DRE - Free Report) Zacks Consensus Estimate for the current-year FFO per share has been revised marginally upward to $1.49 over the past week. The company currently carries a Zacks Rank of 2.

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.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>