What's in Store for Extra Space (EXR) This Earnings Season?
Extra Space Storage EXR is slated to report third-quarter 2021 earnings on Oct 27, after the bell. The company’s quarterly results will likely reflect year-over-year increases in both revenues and funds from operations (FFO) per share.
In the last reported quarter, this Salt Lake City, UT-based self-storage real estate investment trust (REIT) delivered a surprise of 5.13% in terms of FFO per share. Results portrayed strong average occupancy and higher average rates to customers for the quarter.
Over the trailing four quarters, the company surpassed the Zacks Consensus Estimate on each occasion, the average beat being 5.27%. The graph below depicts this surprise history:
Extra Space Storage Inc Price and EPS Surprise
Extra Space Storage Inc price-eps-surprise | Extra Space Storage Inc Quote
Let’s see how things have shaped up prior to this announcement.
Factors to Consider
In the third quarter, Extra Space Storage is likely to have benefited from its solid presence in key cities and measures to boost the company’s geographical footprint through accretive acquisitions and third-party management.
In September, the company announced that its third-party management platform, ManagementPlus, reached the milestone — the company’s 800th managed store. Moreover, in July, the company announced the onboarding of its 2,000th property across 40 states and Washington, D.C.
The self-storage industry continues to benefit from favorable demographic changes. Migration and downsizing trend, and increase in the number of people renting homes have spurred the needs of consumers to rent spaces at storage facilities for parking their possessions.
Further, demand for self-storage spaces is shooting up in the flexible working environment as well as an improving housing market, while move-outs remain low amid the health crisis, resulting in improved year-over-year occupancy trends. The REIT’s high occupancy is resulting in greater pricing power. It is also likely to have benefitted from high brand value and technological advantage and maintained a healthy balance-sheet position.
Amid these, the REIT is likely to have seen growth in revenues in the quarter to be reported with healthy rental rates.
Management and franchise fees for the quarter are projected at $14.92 million, indicating an improvement from the prior-year quarter’s $14.80 million. The Zacks Consensus Estimate of $336 million for the quarterly property rental revenues suggests an increase from the second quarter’s $322 million and the year-ago period’s $290 million. The Zacks Consensus Estimate of $405.3 million for quarterly revenues suggests an 18.2% increase year on year.
Extra Space Storage’s activities during the quarter were adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised 1.2% north to $1.70 in two month’s time. It also calls for a 29.8% year-over-year rise.
Nevertheless, the company operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. In addition, there is a development boom of self-storage units in several markets. This high supply is likely to have intensified competition.
Here is what our quantitative model predicts:
We cannot conclusively predict that Extra Space will be able to beat the Zacks Consensus Estimate this time. This is because the company doesn't have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Extra Space currently carries a Zacks Rank #2 (Buy) and has an Earnings ESP of 0.00%.
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 surprise this quarter:
Apple Hospitality REIT APLE, slated to release third-quarter earnings on Nov 4, has an Earnings ESP of +26.67% and sports a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Digital Realty Trust, Inc. DLR, scheduled to report quarterly numbers on Oct 26, currently has an Earnings ESP of +1.23% and carries a Zacks Rank of 3.
Life Storage Inc LSI, slated to announce third-quarter results on Nov 2, currently has an Earnings ESP of +0.21% and carries a Zacks Rank of 2.
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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