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Is Public Storage (PSA) Set to Beat this Earnings Season?

Public Storage PSA is slated to report first-quarter 2016 results on Apr 26 after the market closes.

Last quarter, this self-storage real estate investment trust (“REIT”) beat the Zacks Consensus Estimate by 1.24%. Over the trailing four quarters, the company exceeded estimates in three occasions and missed in the other, resulting in an average positive earnings surprise of 0.14%. The Zacks Consensus Estimate for the first quarter funds from operations (“FFO”) per share is currently pegged at $2.20.

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 3 (Hold) to beat estimates, and Public Storage has the right mix.  

Zacks ESP: Earnings ESP, which is the percentage difference between the Most Accurate estimate of $2.24 and the Zacks Consensus Estimate of $2.20, is +1.82%. This is a major indicator of a likely positive surprise.

Zacks Rank: Public Storage carries a Zacks Rank #2. The combination of Public Storage’s favorable Zacks Rank and positive ESP makes us confident of a positive surprise this season.

Conversely, we caution against stocks with 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 has a strong brand image and is a recognized and established name in the self-storage industry in the U.S. Solid performance of its U.S. portfolio, high brand value and a strong presence in key cities serve as growth drivers. Acquisition initiatives are further likely to aid growth.

In fact, self storage industry fundamentals were strong as a result of limited new supply resulting from capital constraints and increased barriers to entry. And demand was solid on the back of favorable demographic changes and events like marriages, shifting and death.

Therefore, amid modest supply, Public Storage remains well poised to witness higher same-store revenues, backed by a rise in realized annual rent per occupied square foot and increased occupancy levels in the first quarter.

Other Stocks That Warrant a Look

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

Essex Property Trust Inc. ESS has an Earnings ESP of +1.14% and a Zacks Rank #2. The company will report results on Apr 28.

Taubman Centers, Inc. TCO has an Earnings ESP of +3.53% and a Zacks Rank #3. The company will release results on May 2.

Vornado Realty Trust VNO has an Earnings ESP of +4.03% and a Zacks Rank #3. The company will report first-quarter 2016 results on May 2.

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. All earnings per share numbers presented in this write up represent FFO per share.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
TAUBMAN CENTERS (TCO): Free Stock Analysis Report
 
ESSEX PPTY TR (ESS): Free Stock Analysis Report
 
PUBLIC STORAGE (PSA): Free Stock Analysis Report
 
VORNADO RLTY TR (VNO): Free Stock Analysis Report
 
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