PS Business Parks (PSB) Q3 FFO Misses, Revenues Beat Estimates

PS Business Parks, Inc. PSB reported third-quarter 2019 funds from operations (FFO) of $1.71 per share, which narrowly missed the Zacks Consensus Estimate of $1.73. However, the figure comes in 4.3% higher than the prior-year quarter’s $1.64.    

Results highlight improvement in Same-Park net operating income (NOI), backed by growth in rental rates, as well as higher NOI from non-Same-Park and multi-family assets. However, NOI reduction due to facilities sold in 2018 partly offset the positives.

Rental income came in at around $108.1 million, marking 4.1% growth from the year-ago quarter tally. The reported figure also exceeded the Zacks Consensus Estimate of $106.8 million.

Quarter in Detail

Same-Park rental income was up 4.2% year over year to $96.2 million, while Same-Park NOI climbed 3.6% year over year to $68.5 million, driven by improving rental rates.

Same-Park annualized revenue per occupied-square-foot increased 4.6% to $15.74. However, weighted average square-foot occupancy shrunk 40 basis points year on year to 94.7%.

Liquidity

PS Business Parks exited third-quarter 2019 with cash and cash equivalents of $6.7 million, down from the $37.4 million reported at the end of 2018.

Dividend Update

On Oct 22, the company announced a quarterly dividend of $1.05 per share. The dividend is payable on Dec 30, to shareholders of record as of Dec 13, 2019.

Conclusion

We are encouraged with the better-than-expected third-quarter revenue figure of PS Business Parks, which was backed by growth in rental rates, a trend that is likely to continue in the near term on favorable market fundamentals. The company’s portfolio is well diversified with respect to tenants and markets. It is anticipated to benefit from healthy fundamentals in the industrial and flex categories, in the days ahead. Moreover, it has ample financial flexibility to cushion and enhance its market position, while asset-repositioning efforts are likely to improve the overall portfolio quality.

However, the FFO per share miss is discouraging. Notably, supply is rising in certain sub-markets, which might partly impede its growth momentum. Also, near-time impact on NOI from facilities sold cannot be avoided.

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

PS Business Parks, Inc. Price, Consensus and EPS Surprise

PS Business Parks, Inc. Price, Consensus and EPS Surprise

PS Business Parks, Inc. price-consensus-eps-surprise-chart | PS Business Parks, Inc. Quote

We now look forward to the earnings releases of other REITs like Alexandria Real Estate Equities, Inc. ARE, Vornado Realty Trust VNO and AvalonBay Communities, Inc. AVB, all of which are slated to report their quarterly numbers next week.

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.


Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
AvalonBay Communities, Inc. (AVB) : Free Stock Analysis Report
 
Alexandria Real Estate Equities, Inc. (ARE) : Free Stock Analysis Report
 
Vornado Realty Trust (VNO) : Free Stock Analysis Report
 
PS Business Parks, Inc. (PSB) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research