Extra Space Storage Inc. (EXR - Free Report) has been putting in efforts to expand its business around large population centers and attain geographical diversity.
The company has significantly expanded its business in recent years, growing its branded store count from 694 in 2008 to 1,513 in third-quarter 2017. Also, total stores managed for third-party owners increased from 185 in 2011 to 485 in the recently-reported quarter.
Moreover, over the past five years, Extra Space Storage acquired $4.8 billion in properties. The company gained an increased scale in several core markets on the back of these acquisitions as well as fortified its presence in a number of new markets.
These efforts have helped this Salt Lake City, UT-based self-storage real estate investment trust (REIT) emerge as the second largest self-storage operator in the United States and the largest self-storage management company in the nation. Majority of this REIT’s stores are situated around large population centers which enjoy above-average population and income demographics for stores.
In addition, 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. Additionally, the self-storage industry is likely to continue experiencing solid demand, backed by favorable demographic changes and events like marriages, shifting, death and even divorce.
Also, Extra Space Storage’s Return on Equity (ROE) is 14.4% compared with the industry’s average of 5.8%. This reflects that the company reinvests more efficiently compared to the industry. Further, the company remains committed to boost shareholders’ wealth. It has achieved five-year total increase of a whopping 290% in dividend. Such shareholder-friendly efforts are encouraging.
Also, the industry is characterized by fragmented ownership and only around 20% of the total self-storage square footage is under REIT’s ownership. This creates solid scope for consolidation at some level in the future and with a solid balance sheet, Extra Space Storage remains well poised to compete for acquisitions.
Encouragingly, in the just reported quarter, Extra Space Storage delivered a positive surprise of 2.73% in terms of funds from operations (FFO) per share. In fact, the company exceeded the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 4.46%. The company’s results highlight solid growth in same-store net operating growth and high level of occupancy.
This Zacks Rank #2 (Buy) stock has also seen the Zacks Consensus Estimate for current-year FFO per share being revised 0.2% upward to $4.31 in a month’s time, reflecting analysts’ bullish sentiments. Given its progress on fundamentals, the stock is likely to keep performing well in the quarters ahead.
Shares of Extra Space Storage have outperformed the industry it belongs to, year to date. The company’s shares have gained 12.4%, while the industry registered growth of 5.7%, during this time period.
Stocks to Consider
Investors can also consider other similarly-ranked stocks in the REIT space like CareTrust REIT, Inc. (CTRE - Free Report) , Investors Real Estate Trust (IRET - Free Report) and DCT Industrial Trust Inc. (DCT - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for full-year 2017 earnings of CareTrust REIT remained unchanged at $1.17 in a month’s time.
The fiscal 2018 Zacks Consensus Estimate for Investors Real Estate Trust is pegged at 41 cents, indicating 5.1% rise in the past two months.
The current-year Zacks Consensus Estimate for DCT Industrial Trust is pegged at $2.44 and inched up 0.4% over the last month.
Note: All EPS numbers presented in this report represent funds from operations (“FFO”) per share. 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.
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