Public Storage’s (PSA - Free Report) second-quarter 2017 funds from operations (“FFO”) per share of $2.31 missed the Zacks Consensus Estimate of $2.56. The figure was also down 1.3% from the year-ago tally of $2.34.
Quarterly revenues of $664.3 million also fell short of the Zacks Consensus Estimate of $674.2 million. Nevertheless, revenues managed to grow 4.8% from the year-ago period.
Results reflect a fall in weighted-average square foot occupancy in the same-store portfolio for the reported quarter. However, higher realized annual rent per occupied square foot supported its results. Also, the company benefited from its expansion efforts.
Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.
Behind the Headlines
Same-store revenues advanced 3.3% year over year to $550.0 million during the second quarter, while net operating income (“NOI”) climbed 2.6% to $402.7 million. The increase in same-store revenues was primarily driven by a 4.4% rise in realized annual rental income per occupied square feet to $16.97. However, the weighted-average square foot occupancy of 94.5% contracted 90 basis points year over year.
In addition, the company’s NOI from non-same store facilities enhanced on the back of 292 self-storage facilities acquired, developed or expanded since Jan 2015.
In the reported quarter, Public Storage bought three self-storage facilities, comprising 0.2 million net rentable square feet, for $11.6 million. Following the quarter end, the company acquired or was under contract to acquire seven self-storage facilities, spanning 0.4 million net rentable square feet, for $47.1 million.
Finally, as of Jun 30, 2017, the company had several facilities in development (3.9 million net rentable square feet), with an estimated cost of $468 million, as well as expansion projects (1.7 million net rentable square feet) worth roughly $191 million. Public Storage projects to incur the remaining $376 million of development costs related to these projects mainly over the next 18 months.
Public Storage exited second-quarter 2017 with around $358.3 million of cash and cash equivalents, up from $183.7 million at the end of the prior year.
On Jul 26, Public Storage’s Board of Trustees declared a quarterly dividend of $2.00 per share. The amount will be paid on Sep 28 to shareholders of record as of Sep 13, 2017.
We are discouraged with the lower-than-expected performance of Public Storage in the second quarter. However, higher realized annual rent per occupied square foot is a positive. Notably, the company is a recognized and established name in the self-storage industry in the U.S., and its acquisition and expansion efforts look encouraging. However, rising supply in a number of its markets is a headwind. Rate hike also remains a concern for the company.
Public Storage currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In addition, the stock has declined 6.1% year to date, underperforming the 3.7% gain of the industry it belongs to.
Let us now look forward to the earnings releases of AvalonBay Communities, Inc. (AVB - Free Report) , Alexandria Real Estate Equities, Inc. (ARE - Free Report) and Extra Space Storage Inc. (EXR - Free Report) , all of which are expected to report quarterly figures in the next week.
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
More Stock News: Tech Opportunity Worth $386 Billion in 2017
From driverless cars to artificial intelligence, we've seen an unsurpassed growth of high-tech products in recent months. Yesterday's science-fiction is becoming today's reality. Despite all the innovation, there is a single component no tech company can survive without. Demand for this critical device will reach $387 billion this year alone, and it's likely to grow even faster in the future.
Zacks has released a brand-new Special Report to help you take advantage of this exciting investment opportunity. Most importantly, it reveals 4 stocks with massive profit potential. See these stocks now>>