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Why Extra Space Storage (EXR) Stock Soared 17.4% in a Month?

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A reputed name in the self-storage industry, Extra Space Storage Inc. (EXR - Free Report) , is in investors’ spotlight right now. Shares of the company have surged 17.4% in the last 30 days, outperforming the industry’s growth of 5.2%.

Last month, this Zacks Rank #1 (Strong Buy) company reported solid second-quarter results. Extra Space Storage reported second-quarter 2022 core funds from operations (FFO) per share of $2.13, beating the Zacks Consensus Estimate of $2.04. The figure also came in 29.9% higher than the prior-year quarter’s $1.64.

Results reflected better-than-anticipated top-line growth. The same-store net operating income (“NOI”) improved year over year. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Extra Space Storage also raised its 2022 outlook. It expects core FFO per share in the range of $8.30-$8.50, up from the $8.05-$8.30 range projected earlier. The Zacks Consensus Estimate for the same is currently pegged at $8.46.

Management revised estimates for same-store revenue growth, expecting it to lie within 16% and 18%, up from the earlier range of 13-15%. Same-store NOI growth is projected in the band of 18.5-21.5%, up from the 15-18% band estimated earlier, and acquisitions are projected at $1.2 billion, up from the previous estimate of $800 million.

Analysts also seem optimistic about the stock. The Zacks Consensus Estimate for current-year FFO per share has moved north nearly 2% over the past week. The projected FFO per share growth rate for 2022 is 22.43%.

In recent years, EXR significantly expanded its business, growing its branded-store count from 910 in 2012 to 2,177 as of Jun 30, 2022 in 41 states and Washington D.C. Also, the total stores managed for third-party owners increased from 181 to 864 during the same period.

These efforts have helped this Salt Lake City, UT-based self-storage REIT emerge as the second-largest self-storage owner and/or operator and largest self-storage management company in the United States. With a focus on both primary and secondary markets, Extra Space Storage is well-poised to capitalize on favorable trends.

The self-storage asset category, which is need-based and recession-resilient in nature, has low capital-expenditure requirements and generates high operating margins. The self-storage industry continues to benefit from favorable demographic changes. Also, the migration and downsizing trend and an increase in the number of people renting homes have escalated the needs of consumers to rent space at a storage facility to park their possessions. Further, the demand for self-storage space has increased amid the flexible working environment, offering ample scope to Extra Space Storage to capitalize on the same.

Moreover, Extra Space Storage’s current cash flow growth is projected at 50.41% compared with the 9.64% growth projected for the industry. Moreover, this REIT’s trailing 12-month return on equity (“ROE”) highlights its growth potential. Extra Space Storage’s ROE is 24.31% compared with the industry’s average of 3.60%. This reflects that the company reinvests more efficiently compared with the industry. With solid balance sheet strength, the company is well-poised to capitalize on external growth opportunities, which are likely to increase.

Solid dividend payouts are arguably the biggest enticements for REIT investors, and EXR remains committed to increasing shareholders’ wealth. In February 2022, Extra Space Storage announced a first-quarter 2022 dividend of $1.50 per share on the common stock, which marked a 20% increase over the prior-quarter dividend and a 50% hike over the first-quarter 2021 dividend. The company has maintained its payment thereafter. Its dividend reported a five-year increase of 92.3%. Such shareholder-friendly efforts are encouraging and boost investors’ confidence in the stock.

Other Stocks to Consider

Some other key picks from the REIT sector include Public Storage (PSA - Free Report) and Host Hotels & Resorts (HST - Free Report) .

Public Storage carries a Zacks Rank of 2 (Buy) at present. Public Storage’s long-term growth rate is projected at 7%. The Zacks Consensus Estimate for PSA’s 2022 FFO per share has been revised marginally upward in the past week.

The Zacks Consensus Estimate for Host Hotels & Resorts’ 2022 FFO per share has moved nearly 6.1% upward in the past month to $1.73. HST presently carries a Zacks Rank of 2.

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

In-Depth Zacks Research for the Tickers Above

One ticker, your choice, absolutely free ($25 value):

Host Hotels & Resorts, Inc. (HST) - free report >>

Public Storage (PSA) - free report >>

Extra Space Storage Inc (EXR) - free report >>

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