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Extra Space Storage (EXR) Q3 Earnings: Is a Beat in Store?

Extra Space Storage Inc. EXR is likely to beat expectations in third-quarter 2017. The company is slated to release quarterly numbers on Nov 1, after the market closes.

In the last reported quarter, this Salt Lake City, UT-based self-storage real estate investment trust (REIT) delivered a positive surprise of 3.81% in terms of funds from operations (FFO) per share. Results reflect growth in revenues and improvement in same-store NOI. Further, acquisitions and third-party management platforms supported growth.

The company has a decent surprise history. In fact, the company exceeded the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 4.53%. This is depicted in the graph below:


Extra Space Storage Inc Price and EPS Surprise

Extra Space Storage Inc Price and EPS Surprise | Extra Space Storage Inc Quote

Note: The EPS numbers presented in the above chart represent funds from operations (“FFO”) per share.

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

Why a Likely Positive Surprise?

Our proven model shows that Extra Space 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 Extra Space 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 and the Zacks Consensus Estimate, is +1.19%. This is a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Extra Space Storage’ Zacks Rank #2 further increases the predictive power of ESP and makes us reasonably confident of a positive surprise this season.

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

Extra Space Storage is a notable name in the self-storage industry. The company offers a wide array of well-located storage units to its customers, including boat storage, recreational vehicle storage and business storage. In addition, the self-storage industry is anticipated to experience solid demand, backed by favorable demographic changes and events like marriages, shifting, death and even divorce. As such, its high brand value and robust presence in key cities serve as growth drivers amid healthy demand in the self-storage industry.

The company has also made concerted efforts to grow its business and achieve geographical diversity through accretive acquisitions, mutually beneficial joint-venture partnerships and third-party management services.

Amid these, in the to-be-reported quarter, the company is anticipated to benefit from steady demand in the self-storage industry, and witness growth in same-store revenues and NOI.

In fact, the Zacks Consensus Estimate for third-quarter revenues is currently pegged at $277.0 million, indicating projected growth of 7.72% year over year. Also, the Zacks Consensus Estimate for the third-quarter FFO per share is currently pegged at $1.10. The Estimate has remained unchanged in a month’s time.

Moreover, shares of Extra Space Storage have gained 6.5% in the past six months, outperforming 0.4% growth registered by its industry.

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:

Regency Centers Corporation REG, slated to release third-quarter results on Nov 1, has an Earnings ESP of +2.96% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sabra Health Care REIT, Inc. SBRA, likely to release earnings on Nov 1, has an Earnings ESP of +4.78% and a Zacks Rank of 3.

Boston Properties, Inc. BXP, scheduled to release quarterly numbers on Nov 1, has an Earnings ESP of +0.50% and a Zacks Rank of 3.

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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