We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Extra Space Storage (EXR) is an Apt Portfolio Pick
Read MoreHide Full Article
Extra Space Storage(EXR - Free Report) is well-positioned to benefit from strong pricing power, robust occupancy trends, strategic acquisitions and a healthy balance-sheet position. It is the second-largest owner and/or operator of self-storage properties and the largest self-storage management company in the United States.
The self-storage asset category is basically need-based and recession-resilient in nature. This asset class has low capital-expenditure requirements and generates high operating margins. The favorable demographic changes continue to benefit this asset category. Particularly, the demand for storage facilities has gone up, given the consumers' need to park their possessions amid migration and downsizing trends and a rise in the number of people renting homes. Also, work from home, study from home, elevated home sales and remodeling and the in-and-out migration of metropolitan markets have aided demand for storage facilities.
Analysts seem bullish on this Zacks Rank #2 (Buy) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased 2.5% over the past month to $8.25. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of EXR have lost 2.1% in the past year compared with the industry's decline of 15.6%. However, given its progress on fundamentals and positive estimate revisions, the stock is likely to keep performing well in the quarters ahead and hence the dip offers a good entry point.
Image Source: Zacks Investment Research
Factors That Make Extra Space Storage a Solid Pick
Healthy Operating Performance: Over the past five years, Extra Space Storage has witnessed same-store revenue and net operating income (NOI) growth of 6.1% and 7.5%, respectively. Occupancy grew to 95.3% as of May 31, 2022, up from 94.5% as of Mar 31, 2022. In the first quarter, the year-over-year net rent per occupied square foot growth was 23.6%, reflecting strong pricing power.
With 164 million net rentable square feet and stores in 995 cities and favorable industry fundamentals, EXR is likely to witness healthy operating performance in the upcoming period.
Acquisitions & Development: The company is focused on enhancing its business and achieving geographical diversity through accretive acquisitions, mutually beneficial joint-venture partnerships and third-party management services. In addition to acquisitions, the company is making strategic investments through other channels in the storage sector, including preferred equity investments and bridge loan program. The company’s 2022 guidance assumes $800 million in acquisitions.
During first-quarter 2022, EXR acquired 11 operating stores and three stores at the completion of construction for roughly $225 million. In association with JV partners, EXR acquired two operating stores for a total cost of $42.5 million, of which the company invested $4.3 million.
Moreover, EXR has significantly expanded its business in recent years, growing its branded-store count from 882 in 2011 to 2,130 as of Mar 31, 2022, in 41 states and Washington DC. As of the same period, it managed 847 stores for third parties and 288 stores in joint ventures (JVs).
FFO Growth: Over the past three to five years, EXR recorded FFO per share growth of 10.50% compared with the industry’s average of 0.84%. Also, the FFO per share is expected to be up 19.39% for 2022 compared with the industry’s average of 9.85%.
Balance Sheet & Cash Flow Strength: Extra Space Storage is focused on improving its balance sheet, reducing secured debt and increasing the size of its unencumbered pool. It exited first-quarter 2022 with nearly $66 million of cash and cash equivalents and currently has $800 million shares under its at-the-market (ATM) program available for issuance. The company currently holds a BBB/Stable rating from Standard and Poor's and a Baa2/Stable rating from Moody's Investors Service, rendering the company favorable access to the debt market. With solid balance sheet strength, the company is well-poised to capitalize on external growth opportunities.
EXR’s current cash flow growth is projected at 50.41% compared with the 8.96% growth projected for the industry. In addition, its trailing 12-month return on equity (ROE) is 23.42% compared with the industry’s average of 4.0%. This reflects that the company is more efficient in using shareholders’ funds than its peers.
Dividend: Solid dividend payouts are arguably the biggest enticements for REIT investors and Extra Space Storage remains committed to increasing shareholders’ wealth. In February 2022, Extra Space Storage announced first-quarter 2022 dividend of $1.50 per share on the common stock, which marked a 20% increase from the prior-quarter dividend and a 50% hike over the first-quarter 2021 dividend. Its dividend reported a five-year increase of 92.3%. Such shareholder-friendly efforts are encouraging.
The Zacks Consensus Estimate for Prologis’ 2022 FFO per share has moved 1.4% upward in the past two months to $5.15. PLD presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Rexford Industrial Realty’s current-year FFO per share has moved 1% northward in the past two months to $1.93. REXR carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 7.7% over the past two months to $2.09. OUT carries a Zacks Rank #1, 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why Extra Space Storage (EXR) is an Apt Portfolio Pick
Extra Space Storage(EXR - Free Report) is well-positioned to benefit from strong pricing power, robust occupancy trends, strategic acquisitions and a healthy balance-sheet position. It is the second-largest owner and/or operator of self-storage properties and the largest self-storage management company in the United States.
The self-storage asset category is basically need-based and recession-resilient in nature. This asset class has low capital-expenditure requirements and generates high operating margins. The favorable demographic changes continue to benefit this asset category. Particularly, the demand for storage facilities has gone up, given the consumers' need to park their possessions amid migration and downsizing trends and a rise in the number of people renting homes. Also, work from home, study from home, elevated home sales and remodeling and the in-and-out migration of metropolitan markets have aided demand for storage facilities.
Analysts seem bullish on this Zacks Rank #2 (Buy) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased 2.5% over the past month to $8.25. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of EXR have lost 2.1% in the past year compared with the industry's decline of 15.6%. However, given its progress on fundamentals and positive estimate revisions, the stock is likely to keep performing well in the quarters ahead and hence the dip offers a good entry point.
Image Source: Zacks Investment Research
Factors That Make Extra Space Storage a Solid Pick
Healthy Operating Performance: Over the past five years, Extra Space Storage has witnessed same-store revenue and net operating income (NOI) growth of 6.1% and 7.5%, respectively. Occupancy grew to 95.3% as of May 31, 2022, up from 94.5% as of Mar 31, 2022. In the first quarter, the year-over-year net rent per occupied square foot growth was 23.6%, reflecting strong pricing power.
With 164 million net rentable square feet and stores in 995 cities and favorable industry fundamentals, EXR is likely to witness healthy operating performance in the upcoming period.
Acquisitions & Development: The company is focused on enhancing its business and achieving geographical diversity through accretive acquisitions, mutually beneficial joint-venture partnerships and third-party management services. In addition to acquisitions, the company is making strategic investments through other channels in the storage sector, including preferred equity investments and bridge loan program. The company’s 2022 guidance assumes $800 million in acquisitions.
During first-quarter 2022, EXR acquired 11 operating stores and three stores at the completion of construction for roughly $225 million. In association with JV partners, EXR acquired two operating stores for a total cost of $42.5 million, of which the company invested $4.3 million.
Moreover, EXR has significantly expanded its business in recent years, growing its branded-store count from 882 in 2011 to 2,130 as of Mar 31, 2022, in 41 states and Washington DC. As of the same period, it managed 847 stores for third parties and 288 stores in joint ventures (JVs).
FFO Growth: Over the past three to five years, EXR recorded FFO per share growth of 10.50% compared with the industry’s average of 0.84%. Also, the FFO per share is expected to be up 19.39% for 2022 compared with the industry’s average of 9.85%.
Balance Sheet & Cash Flow Strength: Extra Space Storage is focused on improving its balance sheet, reducing secured debt and increasing the size of its unencumbered pool. It exited first-quarter 2022 with nearly $66 million of cash and cash equivalents and currently has $800 million shares under its at-the-market (ATM) program available for issuance. The company currently holds a BBB/Stable rating from Standard and Poor's and a Baa2/Stable rating from Moody's Investors Service, rendering the company favorable access to the debt market. With solid balance sheet strength, the company is well-poised to capitalize on external growth opportunities.
EXR’s current cash flow growth is projected at 50.41% compared with the 8.96% growth projected for the industry. In addition, its trailing 12-month return on equity (ROE) is 23.42% compared with the industry’s average of 4.0%. This reflects that the company is more efficient in using shareholders’ funds than its peers.
Dividend: Solid dividend payouts are arguably the biggest enticements for REIT investors and Extra Space Storage remains committed to increasing shareholders’ wealth. In February 2022, Extra Space Storage announced first-quarter 2022 dividend of $1.50 per share on the common stock, which marked a 20% increase from the prior-quarter dividend and a 50% hike over the first-quarter 2021 dividend. Its dividend reported a five-year increase of 92.3%. Such shareholder-friendly efforts are encouraging.
Other Stocks to Consider
Some other top-ranked stocks in the REIT sector are Prologis (PLD - Free Report) , Rexford Industrial Realty (REXR - Free Report) and OUTFRONT Media (OUT - Free Report) .
The Zacks Consensus Estimate for Prologis’ 2022 FFO per share has moved 1.4% upward in the past two months to $5.15. PLD presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Rexford Industrial Realty’s current-year FFO per share has moved 1% northward in the past two months to $1.93. REXR carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 7.7% over the past two months to $2.09. OUT carries a Zacks Rank #1, 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.