Based on strong third quarter results,
Extra Space Storage Inc.
) raised both its FFO (funds from operations) outlook for the year
and its quarterly dividend payout. Shares of this self-storage REIT
(real estate investment trust) have been rising for over a year
now, and are currently hovering around the all-time high of $36.51.
Moving forward, earnings for this Zacks #1 Rank (Strong Buy) are
expected to grow 28.4% in 2012 and 15.7% in 2013.
Strong Third Quarter
Extra Space Storage reported strong third quarter results on
October 29, with a 30.6% year-over-year growth in total revenues to
$109.8 million. The healthy top-line growth was attributable to a
solid operating platform backed by an experienced management team,
as the company leveraged its resources and sophisticated revenue
management software to drive traffic to its website and properties.
Same-store revenue increased 6.8% year over year to $71.1 million,
while same-store net operating income (NOI) surged 11.4% to $49.8
Third quarter FFO of 43 cents per share increased 34.4% year over
year and exceeded the Zacks Consensus Estimate by nearly 5%.
Average physical occupancy for same-store properties spiked 180
basis points to 89.8% from 88.0% in the year-ago quarter.
Thanks to these solid results, management raised their FFO guidance
for 2012 to between $1.56 and $1.58 per share, compared to the
earlier range of $1.47 to $1.53. The increased guidance is based on
same-store revenue growth of 6.0% - 6.5% and a same-store NOI
growth of 8.8% - 9.8%.
Analysts have revised their earnings estimates upward for both 2012
and 2013, helping the stock become a Zacks #1 Rank (Strong Buy).
Over the past 60 days, the Zacks Consensus Estimate for 2012
increased 3.3% to $1.58, as 7 of 11 earnings estimates moved
higher. This implies a year-over-year growth of 28.4%.
For 2013, the Zacks Consensus Estimate has increased 7.0% to $1.83
over the same timeframe, as 9 of 13 earnings estimates moved
upward. This represents a year-over-year growth of 15.7%.
Extra Space Storage paid a dividend of 25 cents per share in the
third quarter of 2012. The quarterly dividend represented a 78.6%
increase from the payout in the year-ago quarter. The current
dividend payment affirms a yield of 2.8%.
Extra Space Storage is trading at a premium on a price-to-earnings
(P/E) and price-to-sales (P/S) basis. On a forward P/E basis,
shares trade at 22.50x versus the peer group average of 15.21x. On
a P/S basis, shares are trading at 10.00x versus 5.34x for the peer
group average. A healthy earnings growth prospect warrants the
premium valuation of the company.
Since October 21, 2011, Extra Space Storage shares have largely
fared better than the simple moving average for 200 days or SMA
(200). In addition, the stock has outperformed the S&P 500
index since January 20, 2011. The year-to-date return for the stock
is noteworthy at 50.6%, compared to the S&P 500 tally of 11.1%.
With a favorable supply/demand relationship, rising earnings
estimates, robust growth projections, and a healthy dividend yield,
Extra Space Storage offers an enticing upside potential going
forward. In addition, over 30 years of operating experience in the
self-storage industry bodes well for its long-term growth.
Based in Salt Lake City, Utah, Extra Space Storage owns and
operates self-storage properties across the U.S. The company
provides a wide array of conveniently located and secure storage
solutions across the country, including boat storage, RV
(recreational vehicle) storage and business storage. Presently, its
portfolio includes 910 self-storage properties in 34 states and
Washington, D.C., totaling 610,000 units and spanning 66.7 million
square feet of rentable space. With a market cap of $3.9 billion,
Extra Space Storage is currently the second largest owner and
operator of self-storage properties in the U.S.
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