Yahoo Finance Public Storage (PSA) Q1 FFO Misses Estimates, Occupancy Falls
Public Storage PSA reported a first-quarter 2024 core FFO per share of $4.03, which lagged the Zacks Consensus Estimate of $4.07. The figure also declined 1.2% year over year.
While this self-storage REIT came up with a better-than-anticipated top line, aided by an improvement in the realized annual rent per occupied square foot in the reported quarter, a rise in property tax expenses and marketing expenses, as well as higher interest expenses, acted as spoilsports.
Quarterly revenues of $1.16 billion exceeded the Zacks Consensus Estimate by 0.4%. Moreover, revenues increased 5.8% year over year.
Behind the Headlines
Public Storage’s same-store revenues rose marginally year over year to $913.1 million in the first quarter, highlighting higher realized annual rent per occupied square foot, partly offset by a decline in occupancy. This storage REIT witnessed a 0.8% increase in realized annual rental income per occupied square foot to $22.53. However, the weighted average square foot occupancy of 92.1% was down 0.8% year over year. Our estimate was 92.2%.
The cost of operations for same-store facilities increased 4.8% year over year, mainly due to a rise in property tax expenses and marketing expenses.
Consequently, PSA’s same-store net operating income (NOI) decreased 1.5% to $677.4 million. However, this REIT’s NOI growth from non-same-store facilities was $35.4 million, mainly due to the impact of facilities acquired in 2023 as well as the fill-up of recently developed and expanded facilities.
The company achieved a 77.2% same-store direct NOI margin in the quarter, down from 78.7% in the prior-year quarter.
Interest expenses increased to $67.8 million in the first quarter, up from $36.1 million in the year-ago period. Our estimate was $60.6 million.
Portfolio Activity
In the first quarter, Public Storage opened one newly developed facility and completed various expansion projects, which together added 0.3 million net rentable square feet, costing $35.0 million.
As of Mar 31, 2024, PSA had several facilities in development and expansion, which are expected to add 3.7 million net rentable square feet at an estimated cost of $783.0 million. It expects to incur the remaining $393.7 million of development costs related to these projects, mainly over the next 18 to 24 months.
Balance Sheet Position
Public Storage exited the first quarter of 2024 with $271.6 million of cash and equivalents, down from $370 million as of Dec 31, 2023.
2024 Guidance
Public Storage projects 2024 core FFO per share in the range of $16.60-$17.20. The Zacks Consensus Estimate is currently pegged at $16.92, which lies within the guided range.
The company’s full-year assumption is backed by a projection of a 1% decline to 1% growth in same-store revenues, a 2% to 3.5% rise in same-store expenses and a 2.4% decline to 0.7% expansion in same-store NOI.
Further, the company expects $500 million in acquisitions and $450 million in development openings.
Public Storage currently carries a Zacks Rank #3 (Hold).
Public Storage Price, Consensus and EPS Surprise
Public Storage price-consensus-eps-surprise-chart | Public Storage Quote
Performance of Another Self-Storage REIT
Extra Space Storage Inc. EXR reported first-quarter 2024 core FFO per share of $1.96, which beat the Zacks Consensus Estimate by a penny. However, the figure declined 3% from the prior-year quarter. Quarterly revenues of $799.5 million beat the Zacks Consensus Estimate of $786.5 million. The top line jumped 58.9% year over year, reflecting acquisition.
The results of Extra Space Storage reflect a rise in occupancy and better-than-anticipated revenues. However, higher same-store operating expenses and increased interest expenses during the quarter were a spoilsport.
Upcoming Earnings Releases
We now look forward to the earnings releases of other REITs like Digital Realty Trust, Inc. DLR and Federal Realty Investment Trust FRT, both of which are slated to report on May 2.
The Zacks Consensus Estimate for Digital Realty Trust’s first-quarter 2024 FFO per share is pegged at $1.63, which suggests a year-over-year decrease of 1.81%. DLR currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Federal Realty’s first-quarter 2024 FFO per share is pegged at $1.65, which implies a year-over-year increase of 3.77%. FRT currently carries a Zacks Rank #3.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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