Extra Space Storage Inc. (EXR – Best Idea Short): EXR kicks off self-storage earnings season and reports 2Q21 results AMC on Tuesday, 7/27:
- 2Q21 is the easiest SSNOI comp the company has faced since the GFC down -4.6%, before occupancy comps get tougher beginning 2H21 and the pace of SSNOI the company has enjoyed throughout the pandemic likely begins to decelerate. EXR was easily the most aggressive in the group with initial FY21 SSNOI guidance on 2/22 (SSNOI up +4.25% to +6.25%) and later raised on 4/28 (up +6% to +8%) as self-storage pricing continued to accelerate to the upside
- At the same time and surprisingly so, sell-side consensus ($6.20 on Factset) is already $0.10/share out ahead of the high-end of FY21 Core FFO guidance in the range of $5.95 to $6.10, which means current expectations are likely for FY21 SSNOI above +8%. While we expect EXR to beat and raise on the quarter again, we wonder if the magnitude of the raise will disappoint to the downside this time. It is very rare for the sell-side to position above the consensus range on any REIT, which means the buyside is most likely further ahead in terms of expectations. We just think the bar is set relatively high to move numbers meaningfully higher from here, ahead of much tougher comps
- We are by no means short-changing the company – we have modeled +10% and +7% SSNOI growth for the quarter and year, respectively. We have growth peaking this quarter and decelerating into 1Q22 on both SSNOI and Core FFO
- Recall that Best Idea Long PSA, while in the same sector and sharing many similar market dynamics, is a different story in a different place. PSA continues to move from a place of extremely low or no expectations, through the introduction of first-ever guidance, into an upward revision cycle with more room for average in-place rent growth
- What we expect for EXR’s 2Q21:
- Core FFO: $1.51
- SSNOI: +9.9%
- SSRev: +8%
- SSExp: +3.4% incl. real estate taxes up +6%
Please call or e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
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