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Public Storage PSA is well-positioned to grow in the self-storage market with its presence in key cities and high brand recognition. Accretive buyouts, and development and expansion activities bode well for growth. Technological advancements aid higher revenue generation, and a healthy balance sheet provides financial flexibility.
However, the softening of demand and operating trends is a concern for PSA. High interest expenses add to its woes.
Shares of this Zacks Rank #3 (Hold) company have risen 22.2% over the past six months, outperforming the industry's growth of 13.2%.
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What’s Aiding PSA?
The ‘Public Storage’ brand is a much-recognized and established name in the self-storage industry, with a presence in all major metropolitan markets of the country. The self-storage asset category is need-based, with low capital expenditure and high operating margins. Amid these tailwinds, PSA is well-poised for future revenue growth.
Public Storage has been capitalizing on growth opportunities. From the beginning of 2022 through Sept. 30, 2024, it acquired a total of 243 facilities with 17.2 million net rentable square feet (RSF). As of Sept. 30, 2024, it had several facilities in development and expansion spanning around 4 million net RSF. With solid access to capital, the company is well-poised to take advantage of any potential opportunity.
Public Storage is also leveraging technology for revenue optimization and cost efficiencies. Such efforts are likely to bolster the company’s competitive edge. We estimate total revenues to increase 3.9% year over year in 2024.
PSA concluded the third quarter of 2024 with net debt and preferred equity to EBITDA of 3.9X and an EBITDA to fixed charges of seven times. It also enjoys an “A” credit rating from Standard & Poor’s and an “A2” from Moody’s. The sturdy credit profile and ratings enable the company to access public and private capital markets to raise capital at favorable rates.
While the company has increased its dividend two times in the past five years, its payout has grown 11.74% over the same period. Looking at PSA’s operating environment and financial position compared to the industry’s average, its current dividend is expected to be sustainable in the upcoming period.
What’s Hurting PSA?
The self-storage industry experienced a softer demand and lower operating trends through 2023 and the first nine months of 2024. Although demand trends have improved toward the September-October period in some markets, stabilization will take time.