Jefferies Downgrades Sovran Self Storage (SSS) to Hold
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Jefferies downgraded Sovran Self Storage (NYSE: SSS) from Buy to Hold with a price target of $100.00 (from $135.00).
Analyst George Hoglund commented, "Our downgrade is driven by expectations of slowing same-store revenue and SSNOI growth as SS revenue growth in 2Q16 was 5.7%, down from 6.7% in 1Q16 and mgmt lowered FY2016 SS revenue growth guidance to 5.5% - 6.5%, from 6.0% - 7.0%. The company also lowered SSNOI growth guidance to 6.5% - 7.5%, from 7.5% - 8.5%. The new midpoint of 7% implies a 90bp slowdown from 7.9% in 2015, and would represent the fourth year in a row of moderating SSNOI growth from a peak of 10.3% in 2012. Mgmt noted that it is seeing pressure from new supply in Austin (4.1% of SSNOI) and Houston (11.1% of SSNOI) and is experiencing rent fatigue in certain markets. As such we have reduced our growth expectations accordingly. Further, although we view the acquisition of LifeStorage and the pending rebranding to LifeStorage from Uncle Bob's Self Storage as a long-term positive, we think there is an increased likelihood of negative surprises over the next few quarters as the implementation occurs, such as occupancy weakness, greater than expected marketing spend, and increased promotions. That said, we think all of these concerns are short term in nature and think SSS will eventually (late 2017) reap the rewards of a higher quality portfolio, increased scale and West Coast exposure, and a better brand which may lead to increased occupancy potential and growth in the third-party mgmt business."
Shares of Sovran Self Storage closed at $92.78 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst PT Change, Downgrades
Related EntitiesJefferies & Co, Definitive Agreement
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