Extra Space Storage to Post Q1 Earnings: What Awaits the Stock?

Extra Space Storage EXR, a leading self-storage real estate investment trust (REIT) in the United States, is set to release its first-quarter 2025 results on April 29, after market close. The company’s quarterly results are likely to display a year-over-year rise in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Salt Lake City, UT-based REIT delivered a surprise of 0.50% in terms of core FFO per share. The results reflected higher revenues due to growth in occupancy. Lower same-store net operating income (NOI) during the quarter was a spoilsport.

Over the trailing four quarters, the company beat the Zacks Consensus Estimate on all occasions, with the average surprise being 1.50%. The graph below depicts this surprise history:

Extra Space Storage Inc Price and EPS Surprise

Extra Space Storage Inc price-eps-surprise | Extra Space Storage Inc Quote

Factors to Consider Ahead of EXR’s Q1 Results

In the first quarter, Extra Space Storage is likely to have continued benefiting from high brand value and its strong presence in key cities and efforts to expand through accretive acquisitions.

Moreover, the self-storage asset category is need-based and recession-resilient in nature. This asset class has low capital expenditure requirements and generates high operating margins. Additionally, the self-storage industry continues to benefit from favorable demographic changes. All these factors cumulatively are likely to have contributed to the company’s top-line growth.

However, EXR operates in a highly fragmented market in the United States, with intense competition from numerous operators. There has been a development boom of self-storage units in many markets in recent years. This high supply has fueled competition, affecting its power to raise rents and turn on more discounting, impacting its first-quarter earnings. Further, high interest expenses are expected to have cast a pall on the company’s performance to some extent.

Q1 Projections for EXR

The Zacks Consensus Estimate of $702.1 million for quarterly property rental revenues suggests an increase from the year-ago period’s $688 million. The consensus estimate for revenues from tenant insurance of $85.6 million implies an increase from $81.4 million reported in the year-ago period. Moreover, the consensus mark for management and franchise fees for the quarter is projected at $31.3 million, marginally up from $30.2 million in the year-ago period.

The Zacks Consensus Estimate of $821.2 million for quarterly revenues suggests a 2.71% increase year over year.

However, we estimate a 5.1% year-over-year jump in interest expenses in the first quarter.

Extra Space Storage’s activities during the quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the quarterly core FFO per share has been revised southward by 1% over the past month to $1.97. However, it indicates a 0.51% increase compared to the year-ago reported figure. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

What Our Quantitative Model Predicts for EXR

Our proven model does not conclusively predict a likely surprise in terms of core FFO per share for Extra Space Storage this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.

Extra Space Storage currently has an Earnings ESP of +0.05% and carries a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are two stocks from the broader REIT sector — Host Hotels & Resorts HST and Ventas VTR — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.

Host Hotels & Resorts, scheduled to report quarterly numbers on April 30, has an Earnings ESP of +2.26% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ventas, slated to release quarterly numbers on April 30, has an Earnings ESP of +0.18% and carries a Zacks Rank of 2 at present.

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

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research