Risk-Reward Balanced at Public Storage - Analyst Blog

On Apr 8, 2014, we issued an updated research report on the self-storage real estate investment trust (REIT) - Public Storage PSA.

On Feb 20, aided by improved property operations that facilitated a surge in net operating income and the acquisition of 145 self-storage facilities since Jan 2012, Public Storage reported core FFO of $2.08 per share, beating the Zacks Consensus Estimate by 3.0% and the prior-year quarter figure by 11.8%.

Public Storage's acquisition initiatives helped it carve a niche in the U.S and the European market. Furthermore, Public Storage as a brand is widely recognized in the self-storage industry. It also has one of the strongest balance sheets in the sector with adequate liquidity and virtually the book value of all its real estate facilities is unencumbered as of year-end 2013.

Moreover, amid an improving economy there is a growing demand for its facilities while new supply remains modest. This offers the company ample scope to augment its bottom line going forward.

Yet, the performance of the company's European business is currently discouraging. Moreover, the company operates under significant competition and its substantial construction pipeline increases operational risks. The expected rise in interest rates in the long term also remains a concern.

Over the last 30 days, the Zacks Consensus Estimate moved north by a cent to $8.07 per share for 2014 and for 2015, it climbed 3 cents to $8.58 per share. The stock currently has a Zacks Rank #2 (Buy).

Stocks That Warrant a Look

Investors interested in the REIT industry may consider stocks like Boston Properties Inc. BXP, Cousins Properties Incorporated CUZ, and Duke Realty Corporation DRE. All three stocks have a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.