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Public Storage (PSA) to Post Q4 Earnings: What's in Store?

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Public Storage (PSA - Free Report) is slated to release quarterly numbers on Feb 20, after the market closes. Its funds from operations (FFO) per share as well as revenues are anticipated to be up year over year in the to-be-reported quarter.

Last quarter, this self-storage real estate investment trust (REIT) delivered better-than-expected performance, witnessing a positive surprise of 0.38%. Results mirror an improvement in net operating income (NOI) from both same-store and non-same store facilities.  

The company has a mixed surprise history. In fact, it exceeded estimates in two occasions and missed in the other two, over the trailing four quarters, resulting in an average negative surprise of 3.08%. This is depicted in the graph below:

Public Storage Price and EPS Surprise

Public Storage Price and EPS Surprise | Public Storage Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

Public Storage is one of the largest owners and operators of storage facilities in the United States. The ‘Public Storage’ brand is the most recognized and established name in the self-storage industry. Further, the company has managed to create a significant presence in the European markets through the Shurgard Storage Centers buyout.

Its solid presence in key cities serves as a major growth driver. Also, acquisition and expansion initiatives are likely to stoke growth. In addition, the self-storage industry is anticipated to experience solid demand backed by favorable demographic changes, improving job market and rising incomes, as well as events like marriages, shifting, death and even divorce.

As such, in the quarter under review, the company remains well poised to experience growth in revenues. In fact, the Zacks Consensus Estimate for revenues is pegged at $680.5 million, depicting projected growth of 4.5%.

Supply has been rising in a number of markets and this adversely affects the company’s pricing power. In fact, it operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. This limits its power to raise rents and turn on more discounting.

In addition, over the past 30 days, the Zacks Consensus Estimate for FFO per share for the quarter remained unchanged at $2.72. It reflects a year-over-year improvement of 2.6%.

Furthermore, in the past one month, shares of Public Storage have lost 2.6%, outperforming its industry’s descend of 4.1%.

Earnings Whispers

Our proven model does not conclusively show that Public Storage will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.

Zacks ESP: The Earnings ESP is -0.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Public Storage’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident about an earnings surprise.

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

Host Hotels & Resorts, Inc. (HST - Free Report) , slated to report quarterly numbers on Feb 21, has an Earnings ESP of +0.25% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Outfront Media Inc. (OUT - Free Report) , scheduled to release quarterly figures on Feb 27, has an Earnings ESP of +0.90% and a Zacks Rank of 3.

Gramercy Property Trust (GPT - Free Report) , slated to release fourth-quarter results on Feb 28, has an Earnings ESP of +2.49% and a Zacks Rank of 3.

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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