Public Storage PSA is slated to report fourth-quarter 2016 results on Feb 22, after the market closes .
Last quarter, this self-storage real estate investment trust ("REIT") came up with in-line results. The company has a mixed surprise history. In fact, the company has exceeded estimates in one occasion, met in another and missed in the rest two, in the last four quarters; resulting in an average negative earnings surprise of 1.14%.
Presently, the Zacks Consensus Estimate for the fourth-quarter funds from operations ("FFO") per share is pegged at $2.63.
Public Storage Price and EPS Surprise
Public Storage Price and EPS Surprise | Public Storage Quote
Will Public Storage be able to overcome challenges this time and post a surprise? Or will a challenging backdrop hurt its financials this earnings season? Let's see how things have shaped up for this announcement.
Factors to Consider
Public Storage has a sturdy brand image and is a recognized name in the self-storage industry in the U.S. Its solid presence in key cities serves as a major growth driver. Acquisition and expansion initiatives are likely to propagate growth. Further, it has managed to create a significant presence in the European markets as well through the Shurgard Storage Centers buyout.
However, the company has been witnessing softness in demand. This softness is not in any one specific market but around the nation. As a result, the company is compelled to advertise on the internet and television, which is likely to flare up costs. In addition, the company is reducing the street rates and opting for more discounts.
Also, there has been rising supply in some of its markets. In fact, it operates in a highly fragmented market in the U.S., with intense competition from numerous private, regional and local operators. This curbs its power to raise rents and turn on more discounting.
Finally, Public Storage's performance was inadequate to gain analysts' confidence during the quarter. As a result, the Zacks Consensus Estimate for the fourth quarter remained unchanged at $2.63 over the last seven days.
Our proven model does not conclusively show that Public Storage will beat on earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. However, that is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of $2.66 and the Zacks Consensus Estimate of $2.63, is 1.14%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank: Public Storage carries a Zacks Rank #4 (Sell).
While a positive ESP is a meaningful indicator of a likely positive surprise, the sell-rated rank of the stock lowers the chances of any beat this earnings season.
We caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a few stocks in the REIT sector you may want to consider, as our model shows that they have the right combination of elements to post a positive surprise this quarter:
Chesapeake Lodging Trust CHSP has an Earnings ESP of +2.17% and a Zacks Rank #2. The company will release results on Feb 22. You can see the complete list of today's Zacks #1 Rank stocks here .
Terreno Realty Corporation TRNO , likely to release earnings results around Feb 22, has an Earnings ESP of +4.00% and a Zacks Rank #3.
Hersha Hospitality Trust HT is scheduled to report its earnings on Feb 22. It has an Earnings ESP of +2.04% and a Zacks Rank #3.
Note: All earnings per share numbers presented in this write up represent Funds from Operations ("FFO") per share. FFO, 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.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks - absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>
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 Public Storage (PSA): Free Stock Analysis Report Terreno Realty Corporation (TRNO): Free Stock Analysis Report Hersha Hospitality Trust (HT): Free Stock Analysis Report Chesapeake Lodging Trust (CHSP): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research