Hedgeye - REITS DAILY BRIEF | 5.4.22 | (EXR/PSA 1Q22 RESULTS)

Hedgeye Cartoon of the Day: Spring Fling

Tickers: EXR, PSA

Subsector: Self-Storage

Headline: EXR crushes it again, PSA appears conservative, but what really matters here is RoC deceleration

Removing PSA from Long Bench, adding CUBE & LSI to Short Bench - we think its time to start thinking about storage on the short side given a RoC slowdown into a potentially extended Quad 4 macro environment. There is nothing structurally wrong with the companies, we are just now in that unfavorable part of the growth cycle.
Very quickly on the quarters, our takes are that (1) PSA beat Consensus and missed Hedgeye slightly, generally looks conservative to us in not raising numbers especially on the non-same store pool, but also started with the highest initial bar two months ago, (2) EXR printed a really nice quarter (Core FFO +4.3% vs. Hedgeye and +8% vs. Consensus, including +0.02/share above the NOI line) and took up FY22 numbers as expected, but that (3) what is very clear from the outlooks + base effects is that we are now in the consistent sequential deceleration part of the cycle and coming off 20%+ SSNOI numbers in 1Q22 for the space.
We are going neutral on PSA and not considering shorting this one for now, as we think (1) the structural nature of its reporting + recent value-add acquisitions into the non-same store pool are likely leaving numbers too low/creating potential for upward revisions, and (2) from a style factor perspective there are other vehicles in storage to play here. There is a setup where PSA potentially outperforms relative.

Figure 1: PSA 1Q22 Earnings Variances

PDF LINK

Source: Company reports, Hedgeye.

Figure 2: EXR 1Q22 Earnings Variances

PDF LINK

Source: Company reports, Hedgeye.

Figure 3: Updated Hedgeye REITs Position Monitor

Source: Company reports, FactSet, Hedgeye.

A SPECIAL NOTE: We will be at Hedgeye Live – our first annual subscriber conference. It’s from 5/12-15 at the Hyatt Regency in Greenwich, CT. In addition to all the other Hedgeye Live events, I’m hosting an exclusive “idea dinner” with attendees (capacity capped at 18), as well as a deep-dive breakout session Saturday morning If you’re interested in learning more/joining me at Hedgeye Live, contact support@hedgeye.com

Prior Notes:

5.3.22 - REITS DAILY BRIEF | 5.3.22 | (HR, HTA)

5.1.22 - SUNDAY NIGHT REIT READ | 5.1.22 | (AMH, MPW)

4.29.22 - MPW HEARING FOOTSTEPS? | 4.29.22 | (MPW)

4.28.22 - AVB 1Q22 RESULTS | BIG BEAT DIDN'T HAPPEN, BUT FY22 OUTLOOK RAISED | 4.28.22 | (AVB)

4.27.22 - INVH 1Q22 RESULTS | ROC ROLLING OVER EVERYWHERE | 4.27.22 | (INVH, AMH)

4.26.22 - EQR 1Q22 RESULTS | DISAPPOINTING QUARTER | 4.26.22 | (EQR)

4.26.22 - REITS DAILY BRIEF | 4.26.22 | (AVB 1Q22 PREVIEW)

4.25.22 - REITS DAILY BRIEF | 4.25.22 | (EQR 1Q22 PREVIEW)

4.24.22 - SUNDAY NIGHT REIT READ | 4.24.22 | (AMH, INVH, TCN)

4.22.22 - EVENT REPLAY: MPW BEST IDEA SHORT BLACK BOOK (MPW)

4.21.22 - REITS DAILY BRIEF - LATE EDITION | 4.21.22 | (MPW)