CubeSmart (CUBE) Earnings & Analysis

Latest quarter

CubeSmart reported third-quarter revenue of $294.0 million, above the $290.6 million consensus and up from $285.1 million a year earlier. Adjusted earnings per share as counted by the consensus were $0.66, above the $0.65 estimate; CFO Timothy Martin identified the reported measure as adjusted funds from operations, or FFO, per share.

CubeSmart’s filing attributed the revenue increase primarily to higher occupancy and rental rates for new and existing customers at same-store properties. Martin said same-store revenue rose 1.9%, while other property-related income, which includes fees and merchandise sales, grew 16.8%.

CubeSmart reported diluted earnings per share of $0.42, compared with $0.36 a year earlier. Its gross margin was 67.4%, down from 68.1%, while operating margin rose to 42.8% from 38.9%. The filing said property operating expenses increased primarily because of property taxes and personnel costs, while depreciation and amortization fell as amortization of acquired lease intangibles declined.

For the nine months ended September 30, the filing reported $464.3 million in operating cash flow, down from $472.0 million a year earlier, primarily because of higher cash interest payments.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Christopher Marr said storage demand had remained stable despite a sluggish housing market, while reduced new supply pressure had changed conditions across most markets. He said rental volume was positive in 5 of the last 6 months, and occupancy ended September 90 basis points above a year earlier, after being flat year over year at the end of June.

Marr said CubeSmart held back from further move-in rate increases in July to capture more rental volume. Rates were down modestly year over year during the third quarter, he said, but returned to year-over-year growth by the end of September and improved further in October. Asked about the fourth-quarter outlook, Martin said the company was “not going to get into exactly where we think move-in rates are going to be.”

Marr said 17 of the company’s top 20 markets generated accelerating revenue growth, with urban markets in the Northeast and Midwest leading and previously supply-affected markets improving. Asked about competition and new supply, he said the effects varied by market: North Jersey stores were outperforming their wider metropolitan area, while Tucson faced more competition after new stores were developed.

Martin said same-store expense growth benefited from property-tax appeals, an insurance renewal and technology initiatives. Asked about the predictability of tax appeals, he said their timing and magnitude were “very, very difficult to predict.” He also said changes to customer offerings had contributed to growth in other property-related income, which he expected to moderate after the company passed the anniversary of those changes.

On capital allocation, Martin said CubeSmart repurchased 2.1 million shares for $83.9 million in the quarter and repaid a $300 million bond. He said the Heitman joint venture remained on track to close in the fourth quarter, while a new $300 million unsecured term loan closed after quarter-end. Martin also said CubeSmart added 32 third-party stores during the quarter, ending September with 882 under management.

Guidance

CubeSmart raised its FY2026 same-store revenue growth guidance to 1% to 1.4%, from the 0.5% to 1.25% range given after the second quarter. CFO Timothy Martin attributed the revision to third-quarter performance and improving move-in rates.

The company also revised its full-year same-store operating expense growth range to 2.8% to 3.8%, from 3.25% to 4.5% previously.