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Extra Space Storage (EXR) Down 0.6% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Extra Space Storage (EXR - Free Report) . Shares have lost about 0.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Extra Space Storage due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Extra Space Storage Q2 FFO In Line, Revenues Up Y/Y

Extra Space Storage’s second-quarter 2018 core FFO per share of $1.15 came in line with the Zacks Consensus Estimate. The figure also came in 5.5% higher than the prior-year quarter.

Results reflect growth in same-store revenues and NOI. Further, higher rental rates supported growth, though increased discounts partly offset the benefit.

Quarterly revenues of $296.8 million climbed 7.5% year over year. Also, the revenue figure surpassed the Zacks Consensus Estimate of $294.9 million.

Behind the Headlines

Same-store rental revenues increased 4.1% year over year to $239.8 million during the second quarter, while same-store NOI climbed 3.8% to $173.8 million. The increase in same-store revenues was driven by higher rental rates for new and existing customers, but partly offset by increased discounts. Same-store square foot occupancy was 94.2% as of Jun 30, 2018, down 10 basis points from 94.3% as of Jun 30, 2017.

Notably, during the reported quarter, Atlanta, Hawaii, Indianapolis, Las Vegas and Los Angeles were the major markets, which recorded revenue growth above the company's portfolio average. However, markets, which performed below the company's portfolio average, included Charleston, Chicago, Dallas, Norfolk/Virginia Beach and West Palm Beach/Boca Raton.

Portfolio Activity

Extra Space Storage acquired three operating stores, and purchased its joint-venture (JV) partner's stake in 14 operating stores, for a total investment of around $238.6 million. Moreover, in combination with the JV partners, the company acquired five operating stores, seven stores at completion of construction, as well as completed one development for a total cost of about $201.2 million. Of this, the company invested $35.3 million.

Notably, as of Jun 30, 2018, the company managed 486 stores for third-party owners. Also, with additional 214 stores owned and operated in joint ventures, the company’s total stores under management reached 700.

Balance Sheet

Extra Space Storage exited the June-end quarter, with roughly $49.2 million of cash and cash equivalents, down from $55.7 million at the end of 2017. As of Jun 30, 2018, the company's percentage of fixed-rate debt to total debt was 72.8%.

In addition, following the quarter end, 343,251 shares of common stock were sold by the company using its ATM equity program, at an average sales price of $99.75 per share. This resulted in net proceeds of $33.9 million after deduction of offering costs. Finally, as of Jul 31, 2018, Extra Space Storage had $315.1 million available for issuance under its ATM equity program.

Outlook

Extra Space Storage revised its outlook for 2018. The company now anticipates core FFO per share in the band of $4.60-$4.67. The company projects same-store property revenue growth of 3.75- 4.25% and same-store property NOI growth of around 3.25- 4.50% for the current year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Extra Space Storage has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum based on our style scores.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Extra Space Storage has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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