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Can Public Storage (PSA) Pull Off A Surprise in Q3 Earnings?

Zacks Equity Research
Updated

Public Storage PSA is anticipated to beat estimates in the third-quarter 2017 results, slated to be released on Oct 25, after the market closes.

Last quarter, this self-storage real estate investment trust (REIT) delivered lower-than-expected performance, witnessing a negative surprise of 9.8%.

The company has a mixed surprise history. In fact, it exceeded estimates in one occasion, met in another and missed in the other two, over the trailing four quarters, resulting in an average negative surprise of 3.18%. This is depicted in the graph below:

Public Storage Price and EPS Surprise
 

Public Storage Price and EPS Surprise | Public Storage Quote

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Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Public Storage is likely to beat estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to beat estimates, and Public Storage has the right mix.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of $2.65 and the Zacks Consensus Estimate of $2.61, is +1.30%. This is a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Public Storage’s Zacks Rank #3, when combined with a positive ESP, makes us reasonably confident of a positive surprise this season.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What's Driving the Better-than-Expected Earnings?

Public Storage is one of the largest owners and operators of storage facilities in the United States. The ‘Public Storage’ brand is the most recognized and established name in the self-storage industry. Further, the company managed to create a significant presence in the European markets through the Shurgard Storage Centers buyout.

The company’s solid presence in key cities serves as a major growth driver. Also, acquisition and expansion initiatives are likely to stoke growth. In addition, the self-storage industry is anticipated to experience solid demand backed by favorable demographic changes, improving job market and rising incomes, as well as events like marriages, shifting, death and even divorce.

Moreover, demand for self-storage space is expected to have got a boost following the hurricanes in the nation as people seek for safer place for their possessions, while they reconstruct their properties.

As such, in the to-be-reported quarter, the company remains well poised to experience growth in revenues. In fact, the Zacks Consensus Estimate for revenues is pegged at $684.6 million, depicting projected growth of 3.2%. Particularly, same-store revenues are likely to increase, stemming from a rise in occupancy.

Furthermore, in the past three months, shares of Public Storage gained 3.0%, outperforming its industry’s ascend of 0.6%.



Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

CoreSite Realty Corporation COR, slated to release third-quarter results on Oct 26, has an Earnings ESP of +0.76% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Digital Realty Trust, Inc. DLR, scheduled to release earnings on Oct 25, has an Earnings ESP of +0.24% and a Zacks Rank #2.

Cousins Properties Inc. CUZ, slated to release quarterly numbers on Oct 25, has an Earnings ESP of +1.13% and a Zacks Rank #3.

Note: All EPS 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.

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Public Storage (PSA) : Free Stock Analysis Report
 
Cousins Properties Incorporated (CUZ) : Free Stock Analysis Report
 
Digital Realty Trust, Inc. (DLR) : Free Stock Analysis Report
 
CoreSite Realty Corporation (COR) : Free Stock Analysis Report
 
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