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Public Storage (PSA) Q4 FFO Meets Estimates, Up Y/Y - Analyst Blog

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Public Storage 's ( PSA ) fourth-quarter 2014 core FFO (funds from operations) of $2.20 per share came in line with the Zacks Consensus Estimate and up 5.8% from the year-ago figure. After considering the impact of non-core items, reported FFO came in at $2.17 per share, representing an uptick of 1.9% on a year-over-year basis.

During the reported quarter, this self-storage real estate investment trust ("REIT") recorded a 10.3% year-over-year increase in total revenue to $566.1 million. The revenue figure also marginally exceeded the Zacks Consensus Estimate of $565 million.

For full year 2014, the company reported core FFO per share of $8.09, up 8.7% from a year ago. Revenues came in at around $2.2 billion, reflecting a 10.8% rise year over year.

Inside the Headlines

Same-store revenues increased 5.6% year over year to $467.7 million during the fourth quarter, while net operating income ("NOI") climbed 6.8% to $364.0 million. The increase in same-store revenues was primarily driven by a 5.2% rise in realized annual rent per occupied square foot to $15.20. The company also experienced a 50 basis points (bps) year-over-year increase in weighted average square foot occupancy to 93.5% as of Dec 31, 2014. Moreover, the company experienced an increase in NOI from non-Same Store Facilities, backed by the acquisition of 165 self-storage facilities since Jan 2013.

Furthermore, same-store revenues in Shurgard Europe climbed 3.8% to $50.3 million in the quarter. Same-store NOI for Shurgard Europe edged up 0.8% from the prior-year quarter to $29.3 million. Though realized annual rent per occupied square foot fell 3.3% to $24.06, it was offset by a 620 bps rise in weighted average square foot occupancy in the same-store portfolio to 88.9%.

As of Dec 31, 2014, Public Storage held projects for 25 newly developed facilities (3.0 million net rentable square feet of storage space) at a total cost of $351 million and several expansion projects (they will add 0.4 million net rentable square feet of storage space) at a total sum of $60 million.

In fourth-quarter 2014, Public Storage bought 13 self-storage facilities - 4 located in Minnesota, 2 in Virginia and Texas, and 1 each in North Carolina, South Carolina, Florida, California and Arizona - spanning 1.2 million net rentable square feet - for a total price of $154 million.

Liquidity

Public Storage exited fourth-quarter 2014 with around $187.7 million of cash and cash equivalents, up from $19.2 million at year-end 2014.

Dividend

Concurrent with its earnings release, Public Storage announced a quarterly dividend of $1.40 per share. The dividend will be paid on Mar 31, 2015 to shareholders of record as of Mar 16.

In Conclusion

The year-over-year increase in earnings at Public Storage is encouraging, thanks to the superior performance of its U.S. portfolio. The company's acquisition initiatives helped it carve a niche in the U.S. and European markets. However, the continuous decline in European assets' realized annual rent per occupied square foot remains a cause of concern.

Public Storage currently has a Zacks Rank #2 (Buy). Investors interested in the REIT industry may also consider stocks like Sovran Self Storage Inc. ( SSS ), CubeSmart ( CUBE ) and Extra Space Storage Inc. ( EXR ). While Sovran Self Storage sports a Zacks Rank #1 (Strong Buy), CubeSmart and Extra Space Storage share the same Zacks Rank as Public Storage.

Note: 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.

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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