Bank Of America Downgrades Public Storage On Limited Near-Term Catalysts

Public Storage PSA is facing elevated supply and marketing pressures, and there is limited earnings visibility heading into 2020, according to Bank of America.

The Analyst

BofA’s Jeffrey Spector downgraded Public Storage from buy to Neutral while reducing the price target from $243 to $228.

The Thesis

Public Storage missed the BofA estimates for the third quarter of 2019 and even the recent meeting with management did not provide much clarity, Spector said in the downgrade note.

He added that management did not inspire any confidence in the company’s marketing expenses being lowered.

With same-store net operating income unexpectedly declining in the third quarter, there is little confidence in a reacceleration in 2020, the analyst mentioned.

“Additionally, we have now entered the traditionally slower leasing season in Self-Storage and see limited near-term catalysts until peak leasing begins in March/April 2020 given PSA doesn’t provide guidance,” Spector wrote.

That is when there would be more clarity around Public Storage’s ability to push rents and improve same-store net operating income, the analyst said. He reduced the funds from operations (FFO) estimate for 2020 from $11.06 per share to $11.00 per share, which is below the Street’s current $11.03 estimate.