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Public Storage (PSA) Q4 FFO & Revenues Miss Estimates, Up Y/Y

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Public Storage's (PSA - Free Report) fourth-quarter 2019 core funds from operations (FFO) per share of $2.84 improved 1.1% from the year-ago quarter tally of $2.81. However, the reported figure missed the Zacks Consensus Estimate of $2.86 by 0.7%.

Quarterly revenues of $717.5 million climbed 3.62% year on year but missed the Zacks Consensus Estimate of $720.2 million.

The company’s lower-than-expected FFO per share reflects the unfavorable impact of higher expenses in the quarter for its same-store facilities, resulting from elevated marketing expenses, property manager payroll and property taxes. Nevertheless, higher realized annual rent per occupied square foot and uptick in occupancy supported its same-store revenues. Additionally, Public Storage benefited from the company’s expansion efforts in the reported quarter.

Core FFO per share for 2019 came in at $10.75, up from the prior year’s 1.8%. Total revenues for the year came in at $2.85 billion, marking a 3.4% increase year on year.

Behind the Headlines

Same-store revenues inched up 1.1% year over year to $598.1 million during the fourth quarter. This upside was primarily driven by a 0.6% increase in realized annual rent per occupied square foot to $17.66. Moreover, weighted-average square foot occupancy of 93.1% expanded 60 basis points year over year.

However, same-store cost of operations flared up 4.6% year over year to $135.8 million, primarily reflecting rise in marketing expenses and property manager payroll as well as uptick in property taxes. Consequently, the company’s same-store net operating income (NOI) inched up 0.1% to $462.3 million.

Nonetheless, 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 the recently-developed and expanded facilities.

Portfolio Activity

During the December-end quarter, Public Storage acquired 12 self-storage facilities, comprising 0.9 million net rentable square feet of area, for $121.1 million. These included three facilities in South Carolina, two each in Indiana, North Carolina and Washington and one each in Arizona, Texas and Virginia. Following Dec 31, 2019, the company acquired or was under contract to acquire 14 self-storage facilities, spanning 1.1 million net rentable square feet of space, for $245.3 million.

Finally, as of Dec 31, 2019, the company had several facilities in development (1.3 million net rentable square feet), with an estimated cost of $209 million, as well as expansion projects (3.1 million net rentable square feet) worth $410 million. Public Storage estimates to incur the remaining $477 million of development costs related to these projects, mainly over the next 18 months.

Liquidity

Public Storage exited fourth-quarter 2019 with $409.7 million of cash and cash equivalents, up from the $361.2 million recorded at the end of 2018.

Dividend

On Feb 21, Public Storage announced a regular quarterly dividend of $2 per common share. The dividend will be paid on Mar 31, to shareholders of record as of Mar 16, 2020.

Public Storage Price, Consensus and EPS Surprise

Public Storage Price, Consensus and EPS Surprise

Public Storage price-consensus-eps-surprise-chart | Public Storage Quote

 

Public Storage currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Other Stocks to Consider

Prologis, Inc. (PLD - Free Report) currently carries a Zacks Rank of 2. The company’s FFO per share estimate for 2020 has been revised 2.5% upward to $3.72 in a month’s time. The stock has rallied 29.1% in 12 months’ time.

Highwoods Properties’ (HIW - Free Report) Zacks Consensus Estimate for the current-year FFO per share has moved marginally upward to $3.63 over the past month. Shares of this Zacks #2 Ranked company have gained 8.3% over the past year.

Piedmont Office Realty Trust, Inc. (PDM - Free Report) also carries a Zacks Rank of 2, currently. The company’s ongoing-year FFO per share estimate moved 3.2% north to $1.96 in a month’s time. The stock has rallied 12.4% in the past 12 months.

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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