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Will Growth Efforts Drive Public Storage (PSA) Q2 Earnings?

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Public Storage (PSA - Free Report) is slated to release its quarterly numbers on Aug 1, after the market closes. The company’s Q2 performance is anticipated to display year-over-year improvement in funds from operations (FFO) per share as well as revenues.

In the last reported quarter, this self-storage real estate investment trust (REIT) delivered better-than-expected performance in terms of FFO per share, witnessing a positive surprise of 0.81%. Results highlighted 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 three occasions and missed in the other, over the preceding four quarters, resulting in an average negative surprise of 1.87%. 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, with presence in all major metropolitan markets of the nation.

In addition, the self-storage industry is anticipated to experience solid demand backed by favorable demographic changes, improving job market and rising incomes, and shifting, moving ahead. In fact, the company will likely be able to achieve reasonable rate hike for its existing customers. Further, acquisition and expansion initiatives are anticipated to stoke growth.

In the soon-to-be-reported quarter, the company’s performance will likely reflect benefit from steady demand in the self-storage industry, as well as growth in revenues and NOI. The Zacks Consensus Estimate for revenues is pegged at $689.0 million, depicting projected growth of 3.7%.

Furthermore, the company’s activities during the quarter gained analysts’ confidence. Consequently, the Zacks Consensus Estimate for FFO per share, which witnessed a marginal increase over the last 60 days, is currently pegged at $2.61. The figure also indicates nearly 13% rise, year over year.

Nevertheless, there is a development boom of self-storage units in many markets. In fact, the company operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. This will likely curb its power to raise rents, and turn on more discounting.

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.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP is -0.67%.

Zacks Rank: Public Storage has a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.

Stocks That Warrant a Look

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

Extra Space Storage Inc. (EXR - Free Report) , slated to release April-June quarter results on Jul 31, has an Earnings ESP of +0.80% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chatham Lodging Trust (CLDT - Free Report) , scheduled to release quarterly figures on Aug 1, has an Earnings ESP of +1.14% and a Zacks Rank #3.

HCP, Inc. (HCP - Free Report) , set to report Q2 numbers on Aug 2, has an Earnings ESP of +0.60% and carries a Zacks Rank of 3.

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.

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