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Public Storage (PSA) Up 7.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Public Storage (PSA - Free Report) . Shares have added about 7.9% in that time frame, outperforming the S&P 500.

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

Public Storage Q2 FFO Beats Estimates on Higher Rent

Public Storage’s second-quarter 2019 core FFO per share of $2.64 improved 2.7% from the prior-year figure of $2.57. The reported figure also surpassed the Zacks Consensus Estimate by a whisker.

Results were driven by better-than-expected growth in revenues. Higher realized annual rent per occupied square foot supported the company’s same-store performance. Additionally, Public Storage benefited from its expansion efforts in the reported quarter.

Quarterly revenues of $711.0 million also climbed 3.7% from the prior-year quarter, outpacing the Zacks Consensus Estimate of $705.1 million.

Behind the Headlines

Same-store revenues advanced 1.9% year over year to nearly $602.1 million during the second quarter, while the company’s NOI inched up 0.8% to $434.3 million. This upside in same-store revenues was primarily driven by a 1.7% increase in realized annual rent per occupied square foot to $17.55. Weighted-average square foot occupancy of 94% expanded 20 basis points year over year.

In addition, the company’s NOI from non-same store facilities grew on the back of the facilities acquired in 2018 and 2019, and the fill up of recently-developed and expanded facilities.

Portfolio Activity

During the June-end quarter, Public Storage bought 10 self-storage facilities, comprising 0.7 million net rentable square feet of area, for $116.7 million. Following Jun 30, 2019, the company acquired or was under contract to acquire 10 self-storage facilities, spanning 0.8 million net rentable square feet of space, for $86.5 million.

Finally, as of Jun 30, 2019, the company had several facilities in development (1.1 million net rentable square feet), with an estimated cost of $189 million, as well as expansion projects (2.7 million net rentable square feet) worth roughly $332 million. Public Storage estimates to incur the remaining $329 million of development costs related to these projects, mainly over the next 18 months.

Liquidity

Public Storage exited second-quarter 2019 with around $360.3 million of cash and cash equivalents, slightly down from the $361.2 million recorded at the end of 2018.

Notably, on Apr 19, 2019, the company amended its $500-million revolving line of credit. The move helped extension of the maturity date from Mar 31, 2020 to Apr 19, 2024, as well as lower the current effective borrowing spread over LIBOR from 0.850% to 0.70%, and the current effective facility fee from 0.080% to 0.070%.  

Dividend

On Jul 24, Public Storage’s board of trustees announced a regular quarterly dividend of $2.00 per share. The amount will be paid on Sep 27, to shareholders of record as of Sep 12, 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Public Storage has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Public 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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