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What's in Store for Public Storage (PSA) in Q4 Earnings?

Public Storage PSA is slated to release fourth-quarter and full-year 2022 results on Feb 21 after market close. Both its quarterly revenues and core funds from operations (FFO) per share are likely to have seen year-over-year increases.

In the last reported quarter, this self-storage real estate investment trust (REIT) delivered a surprise of 1.98% in terms of core FFO per share. Results reflected better-than-anticipated top-line growth alongside an improvement in the realized annual rent per occupied square foot. 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 2.09%. 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 and EPS Surprise

Public Storage price-eps-surprise | Public Storage Quote

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Let’s see how things have shaped up before this announcement.

Key Factors

Public Storage is likely to have gained from its solid presence in key cities and high brand value in the fourth quarter. PSA is also likely to have benefited from its technological advantage amid favorable market fundamentals and maintained a healthy balance sheet position.

In addition, the company has been capitalizing on growth opportunities. In the third quarter, Public Storage acquired 24 self-storage facilities comprising 1.7 million net rentable square feet of area for $250.6 million.

Following Sep 30, 2022, the company acquired or was under contract to buy 33 self-storage facilities spanning 1.7 million net rentable square feet of space across six states for $262.6 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. Also, PSA 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 fourth quarter as well.

The Zacks Consensus Estimate for quarterly revenues stands at $1.08 billion. This calls for a 16.75% year-over-year increase.

The Zacks Consensus Estimate for fourth-quarter revenues from self-storage facilities stands at $1.01 billion. This suggests an increase from the $869.72 million witnessed in the year-ago period. Quarterly revenues from ancillary operations are presently projected at $58.54 million, ahead of the $54.60 million registered in the comparable period last year.

PSA’s activities during the quarter under review were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the fourth-quarter core FFO per share has been revised a cent upward to $3.99 in the past month. It also calls for 12.71% year-over-year growth.

However, with the impact of the pandemic abating, vacancy is likely to increase. Furthermore, there is a development boom of self-storage units in several markets. This high supply is likely to have fueled competition. Rising interest rates add to its woes.

For the full-year 2022, PSA projected core FFO per share in the range of $15.35-$15.75. The company’s full-year assumption is backed by 13.5-15% growth in same-store revenues, a 6% to 8% rise in same-store expenses and a 15.4% to 18.0% expansion in same-store NOI. Further, the company expects $800 million in acquisitions and $250 million in development openings.

For the full year, the Zacks Consensus Estimate for the core FFO per share is pegged at $15.75. The figure indicates a 21.81% increase year over year on 22.16% year-over-year growth in revenues to $4.17 billion.

Here Is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict 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 not the case here.

PSA currently carries a Zacks Rank of 3 and has an Earnings ESP of -0.29%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are some stocks from the REIT sector — VICI Properties Inc. VICI and Park Hotels & Resorts Inc. PK — that you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.

VICI Properties, slated to release quarterly numbers on Feb 23, has an Earnings ESP of +0.29% and carries a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Park Hotels & Resorts, scheduled to report quarterly numbers on Feb 22, currently has an Earnings ESP of +3.66% and carries a Zacks Rank of 3.

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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Public Storage (PSA) : Free Stock Analysis Report

Park Hotels & Resorts Inc. (PK) : Free Stock Analysis Report

VICI Properties Inc. (VICI) : Free Stock Analysis Report

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