Extra Space Storage (EXR -1.01%), the largest self-storage operator in the United States, released its earnings for the third quarter on Oct. 29, 2024.
The report highlighted a challenging quarter where the company achieved growth in revenue but fell short of Wall Street expectations on earnings. Specifically, Core Funds From Operations (FFO) reached $2.07 per share, which was below analysts' expectations of $1.11 per share.
Despite generating total revenue of $824.8 million, a year-over-year increase from $748.0 million, the revenue slightly missed the $826.9 million estimate. Overall, the company showcased strategic progress in expansion and operational efficiency despite these hurdles.
Source: Analyst estimates for the quarter provided by FactSet.
| Metric | Q3 2024 Results | Estimates | Q3 2023 Results | YoY Change |
|---|---|---|---|---|
| Core FFO per Share | $2.07 | $1.11 | - | 2.5% |
| Total Revenue | $824.8 million | $826.9 million | $748.0 million | 10.3% |
| Operating Income | $302.7 million | - | $299.8 million | 1.0% |
| Occupancy Rate | 94.3% | - | 94.0% | 0.3% |
Understanding Extra Space Storage
Extra Space Storage owns, manages, and operates self-storage facilities across the U.S., with the largest reach in the industry. It focuses on owning a diverse range of properties, securing rental income and extra revenue through reinsurance offerings to tenants. A key success factor for the company is its acquisition strategy, targeting properties that enhance its portfolio and market presence without diluting shareholder equity.
Recently, the company has concentrated on integration activities following significant acquisitions. These include merging operations under the Extra Space brand and enhancing the customer experience through advanced technology and operational efficiencies. Key growth drivers include successful acquisitions and maintaining high occupancy rates across its facilities.
Quarterly Highlights
During Q3 2024, Extra Space Storage completed several strategic acquisitions, expanding its real estate footprint. The company acquired 10 operating stores and one new development valued collectively at $163.9 million. These acquisitions align with its growth strategies aimed at enhancing market share and driving revenue.
Operating results for the quarter reveal a mixed bag. Core FFO grew 2.5% year-on-year, rising to $2.07 per share. Yet, same-store revenue decreased slightly by 0.3%, and net operating income dropped by 1.0%. Nonetheless, it maintained a solid occupancy rate of 94.3%, showing resilience in tenant demand despite minor market challenges.
Financially, a notable impairment related to integrating Life Storage impacted the quarter, with a $51.8 million loss reducing net income. Despite this short-term challenge, management is optimistic about long-term benefits from these strategic efforts. On the balance sheet, Moody's (MCO -0.92%) upgraded Extra Space's credit outlook from stable to positive, signaling investor confidence in its financial health and capital strategy.
Dividend declarations remained consistent, with the company paying $1.62 per share for the quarter, solidifying commitments to returning value to shareholders. The company's active capital management resulted in $158.4 million in bridge loan originations and the sale of $179.0 million in mortgage bridge loans.
Looking Ahead
For the rest of 2024, Extra Space Storage reiterated its outlook, forecasting Core FFO between $8.00 and $8.15 per diluted share. The firm has adjusted upward its guidance for same-store revenue growth while maintaining optimistic views on operational stability.
Investors should closely monitor progress in the Life Storage integration as it could affect performance in the short term. Future quarters may also see shifts driven by competitive market conditions, which will necessitate proactive adjustments in pricing and operational strategies.
