Extra Space Storage (EXR) Q1 Earnings: What's In The Cards?

Extra Space Storage Inc. (NYSE:EXR) is scheduled to report first-quarter 2017 results on Apr 26, after the closing bell.

This self-storage real estate investment trust (“REIT”) delivered a positive surprise of 6.19% in the last reported quarter. Results indicate an improvement in same-store net operating income (NOI).

The company has a decent surprise history. In fact, over the trailing four quarters, the company exceeded the Zacks Consensus Estimate in each of the quarters, with an average beat of 3.4%. This is depicted in the graph below.

The Zacks Consensus Estimate for first-quarter funds from operations (“FFO”) per share is currently pegged at 98 cents.

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

Factors to Consider

Headquartered in Salt Lake City, UT, Extra Space Storage is a notable name in the self-storage industry. The company offers a vast array of well-located storage units to its customers, including boat storage, recreational vehicle storage and business storage. In first-quarter 2017, the company is anticipated to benefit from steady demand in the self-storage industry, and post growth in same-store revenues and NOI.

However, there is an increasing supply of storage units in certain MSAs, which can adversely affect the company’s pricing power. In fact, Extra Space Storage operates in a highly fragmented market in the U.S., with intense competition from numerous private, regional and local operators. Amid this, occupancy levels are also likely to remain nearly flat in the to-be-reported quarter.

Prior to the first-quarter earnings release, the Zacks Consensus Estimate of FFO per share for the quarter remained unchanged at 98 cents over the past seven days.

However, over the past three months, shares of Extra Space Storage outperformed the Zacks categorized REIT and Equity Trust – Other industry. While Extra Space Storage logged in a gain of 9.1%, the industry climbed 4.7% over this period.



Earnings Whispers

Our proven model does not conclusively show that Extra Space Storage will beat on estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate estimate of 97 cents and the Zacks Consensus Estimate of 98 cents, is -1.02%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Extra Space Storage’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

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.

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 they have the right combination of elements to report a positive surprise this quarter:

Boston Properties Inc. (NYSE:BXP) , slated to release first-quarter results on Apr 25, has an Earnings ESP of +0.67% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Public Storage (NYSE:PSA) , scheduled to release earnings on Apr 26, has an Earnings ESP of +0.41% and a Zacks Rank #3.

EPR Properties (NYSE:EPR) , slated to release earnings on May 2, has an Earnings ESP of +0.84% and a Zacks Rank #3.

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. 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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