Public Storage
(
PSA
), a leading real estate investment trust (REIT) operating
self-storage facilities, is scheduled to report its fiscal 2011
fourth quarter earnings on February 23, 2012. The current Zacks
Consensus Estimate for the second quarter is $1.59 per share,
representing a year-over-year increase of about 19.3%.
Third Quarter Recap
Public Storage reported third quarter 2011 FFO (funds from
operations) of $1.29 per share, compared with $1.69 in the
year-earlier quarter. Fund from operations, a widely used metric to
gauge the performance of REITs, is obtained after adding
depreciation and amortization and other non-cash expenses to net
income.
Excluding several non-recurring items, FFO for third quarter
2011 was $1.56 per share compared with $1.35 in the year-ago
quarter. Recurring FFO for third quarter 2011 exceeded the Zacks
Consensus Estimate by 12 cents.
During the reported quarter, Public Storage recorded an increase
in total revenues to $453.0 million from $422.3 million in the
year-earlier quarter. Total revenues for the reported quarter were
well ahead of the Zacks Consensus Estimate of $428 million.
Magnitude of Estimate Revisions
For fourth quarter 2011, earnings estimates have remained steady
in the last 7 days at $1.59. Earnings estimates for fiscal 2011
have also remained stagnant for the last 7 days at $5.78 per share.
This represents that the analysts are overtly cautious about both
the short and long-term outlook of the company.
Our Recommendation
The long-term earnings estimate picture for Public Storage is
neutral. Public Storage is the largest owner and operator of
storage facilities in the U.S., which has enabled it to achieve
large economies of scale and generate high operating margins.
The Public Storage brand is the most recognized and established
name in the self-storage industry with a presence in all the major
markets across 38 states in the U.S. In addition, the storage
facilities of the company have a high visibility and are usually
located in heavily populated areas that improve the local awareness
of the brand. The company also has one of the strongest balance
sheets in the sector with minimal debt maturities and adequate
liquidity.
However, Public Storage operates in a highly fragmented market
in the U.S., with intense competition from numerous private
regional and local operators. Demand for storage facilities has
also witnessed a significant drop from its peak level prior to the
recession as customers have reduced their discretionary spending.
This undermines the long-term growth potential of the company.
We maintain our 'Neutral' rating on Public Storage, which
currently has a Zacks #2 Rank (short-term 'Buy' rating). We also
have a 'Neutral' recommendation and a Zacks #2 Rank for
Sovran Self Storage Inc.
(
SSS
), one of the competitors of Public Storage.
PUBLIC STORAGE (
PSA
): Free Stock Analysis Report
SOVRAN SLF STOR (
SSS
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research