What's in Store for Public Storage (PSA) in Q1 Earnings?

Public Storage PSA is slated to release first-quarter 2024 results on Apr 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.

In the last reported quarter, this self-storage real estate investment trust (REIT) delivered a surprise of 1.20% in terms of core FFO per share. Results reflected a better-than-anticipated top line, aided by an improvement in the realized annual rent per available square foot in the reported quarter. The company also benefited from its expansion efforts through acquisitions, developments and extensions.

Over the last four quarters, Public Storage surpassed the Zacks Consensus Estimate on all occasions, the average beat being 1.55%. The graph below depicts the surprise history of the company:

Public Storage Price and EPS Surprise

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.

Key Factors

In the first quarter, Public Storage is expected to continue enjoying the benefits of having a strong foothold in major urban areas, established brand recognition and technological superiority. Additionally, PSA is likely to have maintained a robust financial position.

Public Storage has one of the strongest balance sheets in the sector, with adequate liquidity to bank on expansion opportunities through acquisitions and developments. This is likely to have continued in the first quarter as well.

From the beginning of 2021 through 2023, the company acquired a total of 470 facilities with 38.8 million net rentable square feet for $8.5 billion. As of Dec 31, 2023, PSA had various facilities in development and expansion, which are expected to add 3.6 million net rentable square feet at an estimated cost of $766.2 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 $1.15 billion. This calls for a 5.35% year-over-year increase.

The Zacks Consensus Estimate for first-quarter revenues from self-storage facilities stands at $1.08 billion. This suggests an increase from the $1.03 billion witnessed in the year-ago period. Quarterly revenues from ancillary operations are presently projected at $66.74 million, ahead of the $62.05 million registered in the comparable period last year.

The self-storage industry is continuing to experience a softening in demand and operating trends through 2023, and this trend is expected to continue in 2024. Particularly, the industry-wide demand from new customers for storage space at the beginning of 2024 was below the level at the beginning of 2023.

Tenants are reverting to more normal move-out behavior with the abatement of the pandemic, and there is upward pressure on vacate trends. To lure tenants in such an environment, management continues to focus on lowering rental rates to new customers and increasing promotional discounting.

Consequently, same-store revenues are likely to be affected, and we estimate only a 1.1% increase in this metric in the first quarter. Also, we project first-quarter 2024 weighted average square foot occupancy to be 92.2%, down from 92.7% recorded in the prior quarter.

Also, high interest rates add to its woes. We estimate a significant year-over-year increase in interest expenses in the first quarter.

PSA’s activities during the quarter under review were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter core FFO per share has been revised a cent south to $4.06 in the past two months. It also calls for a 0.49% year-over-year decline.

Here Is What Our Quantitative Model Predicts:

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 +0.88%. 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 — Welltower WELL and Park Hotels & Resorts PK — you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.

Welltower, scheduled to report quarterly numbers on Apr 29, has an Earnings ESP of +1.53% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Park Hotels, slated to release quarterly numbers on Apr 30, has an Earnings ESP of +3.66% and carries a Zacks Rank of 3 at present.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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.

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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.

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