Public Storage (PSA) Up 2.8% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Public Storage (PSA). Shares have added about 2.8% 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 catalysts.

Public Storage Q1 FFO Meets Estimates, Revenues Up Y/Y

Public Storage’s first-quarter 2019 FFO per share of $2.52 improved 6.3% from the prior-year figure of $2.37. The reported figure came in line with the Zacks Consensus Estimate. Core FFO per share of $2.53 increased 2% from the year-ago period.

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 $689.0 million also climbed 2.9% from the prior-year quarter. However, the figure missed the Zacks Consensus Estimate of $690.3 million.

Behind the Headlines

Same-store revenues advanced 1.5% year over year to $588.7 million during the first quarter, while the company’s NOI inched up 0.6% to $419.6 million. This upside in same-store revenues was primarily driven by a 1.2% rise in realized annual rent per occupied square foot to $17.41. Weighted-average square foot occupancy of 92.5% expanded 40 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 March-end quarter, Public Storage bought 12 self-storage facilities, comprising 0.8 million net rentable square feet of area, for $81.3 million. Following Mar 31, 2019, the company acquired or was under contract to acquire 10 self-storage facilities, spanning 0.7 million net rentable square feet of space, for $116.4 million.

Finally, as of Mar 31, 2019, the company had several facilities in development (1.2 million net rentable square feet), with an estimated cost of $194 million, as well as expansion projects (2.7 million net rentable square feet) worth roughly $318 million. Public Storage estimates to incur the remaining $299 million of development costs related to these projects, mainly over the next 18 months.

Liquidity

Public Storage exited first-quarter 2019 with around $217.9 million of cash and cash equivalents, down from $361.2 million recorded at the end of 2018.

Notably, on Apr 19, 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%.

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, Public Storage has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision 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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