It has been about a month since the last earnings report for Public Storage (PSA - Free Report) . Shares have added about 8.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Public Storage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Public Storage Q2 FFO Lags Estimates on Rent & Cost Woes
Public Storage's second-quarter 2020 core 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
Currently, Public Storage has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Public Storage has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.