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Public Storage (PSA), a leading real estate investment trust (REIT) operating self-storage facilities, reported third quarter 2010 recurring FFO (funds from operations) of $1.35 per share, which missed the Zacks Consensus Estimate by 3 cents.

Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Below we cover the results of the recent earnings announcement, as well as the subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.

Earnings Report Review
During the reported quarter, Public Storage recorded an increase in total revenues to $422.8 million from $412.1 million in the year-earlier quarter. Total revenues for the reported quarter were well ahead of the Zacks Consensus Estimate of $395 million.

Same-store revenues increased 1.2% year over year to $365.1 million during the quarter, while net operating income climbed 0.2% to $245.7 million. The increase in same-store revenues was primarily due to a 1.6% rise in average occupancy, partially offset by a 0.5% dip in realized rent per occupied square foot.

(Read our full coverage on this earnings report: Public Storage Misses Estimates)

Earnings Estimate Revisions- Overview
Fiscal earnings estimates have climbed for Public Storage since the earnings release, meaning that analysts are bullish about the long-term performance of the company. Lets dig into the earnings estimate details.

Agreement of Estimate Revisions
In the last 30 days, fiscal 2010 earnings estimates were raised by 10 analysts out of 18 covering the stock, while only 1 has lowered the same. For fiscal 2011, 15 out of 21 analysts covering the stock revised their estimates upward, while 2 have revised the estimates in the opposite direction during the past 30 days. This indicates a clear positive directional movement for the fiscal earnings estimates.

Magnitude of Estimate Revisions
Earning estimates for fiscal 2010 have increased by 21 cents in the last 30 days to $4.66. For fiscal 2011, earnings estimates have increased by 6 cents to $5.43 in the last 30 days. Public Storage plans to continue its current strategy of conservative rental rates and high promotional discounts in the fourth quarter and anticipates achieving higher occupancy levels in 2011 compared to 2010.

Moving Forward
The long-term earnings estimate picture for Public Storage is positive. Public Storage is the largest owner and operator of storage facilities in the U.S. and has significantly increased the scale and scope of its operations through the acquisition of Shurgard Storage Centers that had a considerable presence in the European markets.

Although Public Storage currently owns a 49% stake in Shurgard, the size and scope of its operations have enabled it to achieve economies of scale, thereby generating high operating margins and managerial efficiencies.

However, with a challenging macroeconomic environment, demand for storage facilities has witnessed a significant fall as customers have reduced their discretionary spending.

In addition, Public Storage has significant exposure to Florida, a state whose economy has been particularly hit hard by the housing meltdown, fewer home sales and falling new homes construction. The demand for self-storage facilities is therefore, likely to decrease. This has affected the top-line growth of the company, and has undermined its short-term profitability.

We maintain our long-term Neutral rating on Public Storage, which presently has a Zacks #3 Rank translating into a short-term 'Hold' recommendation, indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.

Meanwhile, MPG Office Trust Inc. (MPG), one of the peers of Public Storage, has a long-term Outperform recommendation and a Zacks #1 Rank translating into a short-term 'Strong Buy' rating.translating into a short-term 'Strong Buy' rating.

Source: Earnings Scorecard: Public Storage