CIBC World Cuts Public Storage to 'Hold'

Analyst Michael Mueller cites earnings revisions, low visibility, and weaker occupancy trends for the storage operator

CIBC World cut Public Storage (PSA ) to hold from buy.

Late Thursday the storage facility operator posted $0.70 vs. $0.75 second-quarter funds from operations per share. Analyst Michael Mueller says weak occupancy trends are continuing. She notes second-quarter funds from operations was $0.06 below his estimate, and that the company's second-quarter occupancy rate fell 360 basis points to 86.4%, while same-store net operating income growth was -6.8%.

Mueller says aggressive advertising and discounting helped occupancy early in the quarter, but adds that vacancies rose when promotions ceased; July occupancy appears even lower at 84% to 85%. He sees downward earnings revisions, low visibility, and no clear catalyst. Mueller says he is moving to the sidelines for the time being. He cut his $3.20 2002 funds from operations per share estimate to $2.85, and cut the $3.38 2003 estimate to $3.03.

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