Public Storage Hits 52-Week High: Right Time to Buy? - Analyst Blog

Shares of Public Storage (PSA) scaled a new 52-week high of $188.12 at the end of the trading session on Nov 10, reflecting a solid year-to-date return of 29.5%. The trading volume for the session was nearly 0.5 million shares.

Recently, the company reported a better-than-expected earnings performance for third-quarter 2014. It also remains right on track with its acquisition investments. Therefore, despite scaling such high, we believe this Zacks Rank #2 (Buy) stock has plenty of upside left, given the improving fundamentals of the self storage industry, opportunistic acquisitions and a long-term expected growth rate of 5.4%.

Growth Drivers

Aided by an increase in revenues, Public Storage reported better-than-expected earnings in third-quarter 2014. The company's core FFO (funds from operations) of $2.11 per share rose 9.9% from the year-ago figure. After considering the impact of a number of non-core items, reported FFO came in at $2.08 per share, representing an uptick of 4% on a year-over-year basis. Both the FFO per share and core FFO per share exceeded the Zacks Consensus Estimate of $2.07 per share.

During the reported quarter, this self-storage real estate investment trust (“REIT”) recorded an 11.6% year-over-year increase in total revenue to $571.6 million. The revenue figure also exceeded the Zacks Consensus Estimate of $546 million.

Public Storage is one of the largest owners and operators of storage facilities in the U.S. In fact, the ‘Public Storage' brand enjoys a strong value with a presence that spans all major metropolitan markets of the U.S. Further, through the acquisition of Shurgard Storage Centers, the company has managed to create a significant presence in the European markets as well.

The company's acquisition initiatives have also helped it carve a niche in the U.S. and European markets. In the third quarter, Public Storage bought 25 self-storage facilities – 19 in Florida, 3 in Maryland and 1 each in North Carolina, New Jersey and Virginia, covering 1.8 million net rentable square feet – for a total of $239 million. Moreover, following the quarter end, the company acquired 10 self-storage facilities for approximately $98 million in cash.

Echoing similar sentiments, the Zacks Consensus Estimate for both 2014 and 2015 moved north 2 cents to $8.02 per share and $8.54 per share, respectively, over the last 30 days.

Other REITs Scaling Highs

Other REITs that have scaled 52-week highs on Nov 10 include Equity Residential (EQR), DDR Corp. (DDR) and Duke Realty Corporation (DRE).

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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