Extra Space Storage Inc.EXR has been making concerted efforts to expand its business around large population centers and diversify geographically.
The company has significantly expanded its business in recent years, growing its branded store count from 694 in 2008 to 1,483 in fourth-quarter 2017. Also, total stores managed for third-party owners increased from 185 in 2011 to 422 in the recently-reported quarter.
Moreover, over the past five years, Extra Space Storage acquired $4.5 billion in properties. Through these acquisitions, the company gained an increased scale in several core markets as well as fortified its presence in a number of new markets.
As a result, this Salt Lake City, UT-based self-storage real estate investment trust (REIT) emerged as the second largest self-storage operator as well as the largest self-storage management company in the United States. Majority of this REIT's stores are situated around large population centers which enjoy above-average population and income demographics for stores.
In addition, the self-storage asset category is basically need-based and recession-resilient in nature. This asset class has low capital-expenditure requirements and generates high operating margins. Additionally, the self-storage industry is likely to continue experiencing solid demand, backed by favorable demographic changes, and events like marriages, shifting, death and even divorce.
Also, Extra Space Storage's Return on Equity (ROE) is 18.9% compared with the industry's average of 5.4%. This reflects that the company reinvests more efficiently compared to the industry. Further, the company remains committed to boost shareholders' wealth. It has achieved five-year total increase of a whopping 212% in dividend. Such shareholder-friendly efforts are encouraging.
Furthermore, the industry is characterized by fragmented ownership and only around 20% of the total self-storage square footage is under REIT's ownership. This creates solid scope for consolidation at some level in the future and with a solid balance sheet, Extra Space Storage remains well poised to compete for acquisitions.
Encouragingly, in the just reported quarter, Extra Space Storage delivered a positive surprise of 3.70% in terms of funds from operations (FFO) per share. In fact, the company exceeded the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 3.8%. The company's results highlight solid growth in same-store net operating growth and high level of occupancy.
This Zacks Rank #2 (Buy) stock has also seen the Zacks Consensus Estimate for current-year FFO per share being revised 0.9% upward to $4.52 in a month's time, reflecting analysts' bullish sentiments. Given its progress on fundamentals, the stock is likely to keep performing well in the quarters ahead.
Shares of Extra Space Storage have outperformed the industry it belongs to, in the past three months. The company's shares have gained 1.2%, while the industry incurred a loss of 10.2%, during this time period.
Stocks to Consider
Investors can also consider other similarly-ranked stocks in the real estate space like CBRE Group, Inc. CBG , FirstService Corp. FSV and Jones Lang LaSalle Incorporated JLL . You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
CBRE Group's Zacks Consensus Estimates for 2018 earnings per share have been revised 5.3% upward to $2.98 over the past month. Its share price has risen 7.7% in three months' time.
FirstService Corporation's earnings per share estimates for the current year have moved up 17.8% to $2.65 in a month's time. Its shares have inched up 0.6% over the past three months.
Jones Lang LaSalle's earnings per share estimates for 2018 have been revised 5.2% upward to $9.85 over the past month. The stock has rallied 11.7% during the past three months.
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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