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Extra Space Storage (EXR) Q4 FFO & Revenues Beat Estimates

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Extra Space Storage, Inc.’s EXR fourth-quarter 2019 core funds from operations (FFO) per share of $1.27 outpaced the Zacks Consensus Estimate of $1.25. The figure also comes in 4.1% higher than the prior-year quarter reported tally of $1.22.

Results reflect growth in same-store revenues on higher occupancy and net rental rates for customers amid headwinds from new supply. However, the company witnessed rise in payroll, marketing expenses, repairs and maintenance and property taxes in the quarter.

Quarterly revenues came in at $335.8 million, climbing 9.3% year over year. The revenue figure also surpassed the Zacks Consensus Estimate of $335.3 million.

For full-year 2019, the company recorded core FFO per share of $4.88, up 4.5% from the prior-year tally of $4.67. The reported figure also beat the Zacks Consensus Estimate of $4.86.  The company generated revenues of $1.31 billion for the year, up 9.3% year on year. The revenue figure also surpassed the Zacks Consensus Estimate of $1.3 billion.

Behind the Headlines

Same-store rental revenues increased 2.5% year over year to $259.5 million during the fourth quarter, while same-store NOI was up 1% to $187.1 million. This upswing in same-store revenues stemmed from higher occupancy and net rental rates for customers. Same-store square foot occupancy was 92.4% as of Dec 31, 2019, up 70 basis points year on year.

Notably, during the reported quarter, Chicago, Las Vegas, Memphis,Norfolk/Virginia Beach, Oklahoma City and Phoenix were the major markets, which registered revenue growth above the company's portfolio average.

Nonetheless, markets, including Charleston, Denver, Houston, Miami, Tampa and West Palm Beach/Boca Raton, performed below the company's portfolio average.

Portfolio Activity

During the final quarter of 2019, the company acquired five operating stores for $50.9 million. Moreover, in conjunction with its joint-venture partners, the company purchased three stores at the completion of construction, for a total cost of roughly $60 million. Of this, the company invested $18.1 million.

Extra Space Storage added 41 stores (gross) to the company’s third-party management platform. As of Dec 31, 2019, it managed 646 stores for third-party owners. Furthermore, with additional 246 stores owned in joint ventures, total stores under management summed 892.

Balance Sheet

Extra Space Storage exited fourth-quarter 2019, with $65.7 million of cash and cash equivalents, up from the $57.5 million recorded at the end of 2018. As of Dec 31, 2019, the company's percentage of fixed-rate debt to total debt was 78.7%.

During the December-end quarter, the company did not sell any shares of common stock using its ATM program. Extra Space Storage had $298.6 million available for issuance under its ATM program as of Dec 31, 2019.

Outlook

Extra Space Storage anticipates full-year 2020 core FFO per share of $4.99-$5.08. The Zacks Consensus Estimate for the same is currently pinned at $5.04.

The company projects same-store revenue growth of 0.75-1.75% and same-store NOI growth of around -0.5 to 1% for the current year (excluding tenant reinsurance).

In Conclusion

Extra Space Storage posted solid results which indicate decent same-store NOI growth. This apart, accretive acquisitions and a strong third-party management platform fueled growth.

The company’s presence in key cities and strategic joint ventures will drive long-term profitability. Nonetheless, it operates in a highly-fragmented market in the United States. Furthermore, there is a development boom of self-storage units in many markets. This high supply is likely to intensify competition and curb the REIT’s pricing power.

Extra Space Storage currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

 

Extra Space Storage Inc Price, Consensus and EPS Surprise

 

Extra Space Storage Inc Price, Consensus and EPS Surprise

Extra Space Storage Inc price-consensus-eps-surprise-chart | Extra Space Storage Inc Quote

We, now, look forward to the earnings releases of other REITs like Public Storage PSA, American Tower Corporation (AMT - Free Report) and Mack-Cali Realty Corporation CLI, all of which are slated to report their quarterly numbers next week.

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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