Public Storage PSA is slated to release third-quarter 2024 results on Oct. 30 after market close. While its quarterly revenues are expected to witness a year-over-year increase, core funds from operations (FFO) per share might display a decline.
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In the last reported quarter, this self-storage real estate investment trust (REIT) delivered a surprise of 0.71% in terms of core FFO per share. However, the figure declined 1.2% year over year. Quarterly revenues of $1.17 billion increased 4.8% year over year.
Over the last four quarters, Public Storage surpassed the Zacks Consensus Estimate on three occasions and missed once, the average beat being 0.95%. The graph below depicts the surprise history of the company:
Public Storage Price and EPS Surprise
Public Storage price-eps-surprise | Public Storage Quote
Let’s see how things have shaped up before this announcement.
Factors to Note Ahead of PSA's Upcoming Results
Public Storage is likely to have continued to benefit from its strong presence in major urban markets, well-established brand and technological edge during the third quarter. PSA probably maintained its solid financial position, backed by one of the strongest balance sheets in the industry. With sufficient liquidity, the company remained well-positioned to capitalize on expansion opportunities through acquisitions and development, a trend that is likely to have persisted in the third quarter.
From the beginning of 2022 through June 30, 2024, Public Storage acquired a total of 240 facilities with 17 million net rentable square feet for $3.4 billion. As of June 30, 2024, Public Storage had several facilities in development and expansion, which are expected to add 3.8 million net rentable square feet at an estimated cost of $738.7 million. Such acquisition and expansion initiatives are anticipated to have stoked the company’s growth during the period under consideration.
Amid these, Public Storage is likely to have seen growth in revenues in the quarter to be reported. The Zacks Consensus Estimate for quarterly revenues stands at $1.18 billion. This calls for a 3.44% year-over-year increase.
The Zacks Consensus Estimate for third-quarter revenues from self-storage facilities stands at $1.11 billion. This suggests an increase from the $1.08 billion witnessed in the year-ago period. Quarterly revenues from ancillary operations are presently projected at $72.42 million, ahead of the $65.10 million registered in the comparable period last year.
However, the self-storage industry is continuing to experience a softening in demand and operating trends through 2023 and the first half of 2024, and this trend is expected to have continued in the second half also. The company continues to see new customer price sensitivity and is likely to face headwinds from lower new customer rates in the near term. To lure tenants into such an environment, management continues to focus on lowering rental rates to new customers and increasing promotional discounting.
Same-store revenues are likely to be affected. We project the third-quarter 2024 weighted average square foot occupancy to be 92.8%, down from 93% recorded in the prior quarter.
Also, high interest rates add to its woes. We estimate a 20.5% year-over-year increase in interest expenses in the third quarter.
PSA’s activities during the quarter under review were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the third-quarter core FFO per share has been revised a cent south to $4.25 in the past month. It also calls for a 1.85% year-over-year decline.
Here is What Our Quantitative Model Predicts for PSA:
Our proven model predicts a surprise in terms of FFO per share for Public Storage this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.
Public Storage currently carries a Zacks Rank of 3 and has an Earnings ESP of +0.67%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks That Warrant a Look
Here are two other stocks from the broader REIT sector — Extra Space Storage EXR and Ventas, Inc. VTR — that you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.
Extra Space Storage, scheduled to report quarterly numbers on Oct. 29, has an Earnings ESP of +0.67% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ventas, scheduled to report quarterly numbers on Oct. 30, has an Earnings ESP of +0.97% and carries a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
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Public Storage (PSA) : Free Stock Analysis Report
Ventas, Inc. (VTR) : Free Stock Analysis Report
Extra Space Storage Inc (EXR) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
