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Public Storage (PSA) Q3 FFO Beats Estimates, View Raised

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Shares of Public Storage (PSA - Free Report) are up 1.75% in the pre-market trading on the NYSE today as the self-storage REIT came up with better-than-expected third-quarter 2023 core funds from operations (FFO) per share on higher revenues and raised outlook after the market closed yesterday.

Public Storage reported a third-quarter 2023 core FFO per share of $4.33, which increased 4.8% year over year and came ahead of the Zacks Consensus Estimate of $4.21.

Results showed a better-than-anticipated top line, aided by an improvement in the realized annual rent per available square foot in the reported quarter. The company also benefited from its expansion efforts through acquisitions, developments and extensions. It also raised its 2023 outlook.

Quarterly revenues of $1.14 billion were 0.5% ahead of the Zacks Consensus Estimate. Moreover, revenues increased 5.1% year over year.

In September, PSA closed the acquisition of BREIT Simply Storage LLC, a self-storage company that owns and operates 127 self-storage facilities (9.4 million net rentable square feet) and manages 25 self-storage facilities for third parties for $2.2 billion in cash.

Behind the Headlines

Public Storage’s same-store revenues increased 2.5% year over year to $869.7 million in the third quarter, highlighting higher realized annual rent per occupied square foot, partially offset by a decline in occupancy. This storage REIT witnessed a 3.7% increase in realized annual rental income per occupied square foot to $23.20. However, the weighted-average square foot occupancy of 93.4% was down 1.2% year over year. Our estimate was 93%.

The cost of operations for same-store facilities increased 2.8% year over year, mainly due to a rise in property tax expenses and marketing expenses.

Consequently, PSA’s same-store direct net operating income (NOI) increased 1.9% to $692.99 million. Also, this REIT’s NOI growth from non-same-store facilities was $23.3 million, mainly due to the impact of facilities acquired in 2021, 2022 and 2023 and the fill-up of recently developed and expanded facilities.

The company achieved a 79.7% same-store direct NOI margin in the quarter, down from 80.2% in the prior-year quarter.

Portfolio Activity

In the third quarter, Public Storage acquired 137 self-storage facilities, comprising 10.1 million net rentable square feet of area, for $2.3 billion. This included 127 self-storage facilities from the Simply Acquisition. Following the quarter-end, PSA acquired or was under contract to acquire 11 self-storage facilities across eight states with 0.8 million net rentable square feet for $170.3 million.

It opened three newly developed facilities and completed several expansion projects with 0.5 million net rentable square feet, costing $88.2 million.

As of Sep 30, 2023, PSA had several facilities in development (2.4 million net rentable square feet) estimated to cost $501.8 million and various expansion projects (2.2 million net rentable square feet) estimated to cost $450.3 million. It expects to incur the remaining $495 million of development costs related to these projects, mainly over the next 18 to 24 months.

Balance Sheet Position

Public Storage exited the third quarter of 2023 with $629.8 million of cash and equivalents, down from $775.25 million as of Dec 31, 2022.

2023 Guidance Raised

Public Storage raised its guidance for 2023. It now projects 2023 core FFO per share in the range of $16.60-$16.85, revised from the prior-guided range of $16.40-$16.80. The Zacks Consensus Estimate is currently pegged at $16.73, which lies within the guided range.

The company also revised its expectations for same-store revenue growth to 4-4.75% from the prior guidance of 3.25-5%. Same-store expenses are now expected to grow 5-6.5% compared to the prior-guided range of 4.75-6.75%.

Consequently, same-store NOI was revised to 3.2-4.7% from 2.2-5.1% estimated previously.

PSA raised its guidance for acquisitions to $2.7 billion from $2.6 billion guided earlier while retaining its development opening projections of $375 million.

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

Upcoming Earnings Releases

We now look forward to the earnings releases of other storage REITs like Extra Space Storage (EXR - Free Report) and CubeSmart (CUBE - Free Report) , which are slated to report on Nov 7 and Nov 2, respectively.

The Zacks Consensus Estimate for Extra Space Storage’s third-quarter 2023 FFO per share is pegged at $2.03, suggesting a year-over-year decrease of 8.1%. EXR currently carries a Zacks Rank #3.

The Zacks Consensus Estimate for CubeSmart’s third-quarter 2023 FFO per share is pegged at 67 cents, implying a year-over-year increase of 1.52%. CUBE currently carries a Zacks Rank #4 (Sell).

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.

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