Extra Space Storage (EXR) Q1 FFO And Revenues Top Estimates

Extra Space Storage, Inc.’s (NYSE:EXR) first-quarter 2019 core funds from operations (FFO) per share of $1.16 outpaced the Zacks Consensus Estimate of $1.14. The figure also comes in 6.4% higher than $1.09 in the prior-year quarter.

Results reflect growth in same-store net operating income (NOI) despite pressure from new supply in 2019. The company witnessed higher rental rates for both new and existing customers.

Quarterly revenues of $311.5 million climbed 9.1% year over year. The revenue figure also exceeded the Zacks Consensus Estimate of $309.4 million.

Behind the Headlines

Same-store rental revenues increased 4.2% year over year to $252.3 million during the first quarter, while same-store NOI was up 4.8% to $180.5 million. The upswing in same-store revenues stemmed from higher rental rates for both new and existing customers. However, same-store square foot occupancy was 91.6% as of Mar 31, 2019, down 20 basis points from 91.8% as of Mar 31, 2018.

Notably, during the reported quarter, Atlanta, Chicago, Hawaii, Las Vegas, Phoenix and Sacramento were the major markets, which recorded revenue growth above the company's portfolio average. Nonetheless, markets, including Charleston, Dallas, Denver, Houston, Miami and Tampa, performed below the company's portfolio average.

Portfolio Activity

Extra Space Storage acquired two stores at the completion of construction and purchased its joint-venture (JV) partner's stake in 12 stores for an aggregate investment of around $222.3 million, during the January-March period. Also, in combination with its JV partners, the company acquired one operating store and six Certificate of Occupancy stores, for $210.6 million. Of this, the company has invested $47.7 million. Further, the company added 46 stores (on a gross basis) to its third-party management platform.

As of Mar 31, 2019, the company managed 577 stores for third-party owners. Furthermore, with additional 228 stores owned and operated in joint ventures, total stores under management reached 805.

Balance Sheet

Extra Space Storage exited first-quarter 2019 with roughly $39 million of cash and cash equivalents, down from $57.5 million recorded at the end of 2018. As of Mar 31, 2019, the company's percentage of fixed-rate debt to total debt was 72.0%.

During the reported quarter, the company did not sell any shares of common stock using its ATM equity program. Finally, as of Mar 31, 2019, Extra Space Storage had $257.9 million available for issuance under its ATM equity program.

Outlook

Extra Space Storage anticipates full-year 2019 core FFO per share of $4.76-$4.85. The Zacks Consensus Estimate for the same is currently pegged at $4.80.

The company projects same-store revenue growth of 2- 3% and same-store NOI growth of around 1.25- 2.75% for the current year.

In Conclusion

Extra Space Storage enjoys presence in key cities and opts for joint ventures to drive long-term profitability. Focus on expansion of the geographical footprint through accretive acquisitions and third-party management platforms also bode well. However, 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 many markets. This high supply is likely to intensify competition for the company, curb its power to raise rents and turn on discounting.

Extra Space Storage currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Apartment Investment and Management Company (NYSE:AIV) , Regency Centers Corporation (NASDAQ:REG) and Federal Realty Investment Trust (NYSE:FRT) which are slated to report their quarterly numbers on May 2.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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