Back to top

Analyst Blog

Industrial real estate investment trust (REIT) Prologis Inc. (PLD - Analyst Report) will issue its third-quarter 2013 results tomorrow, Oct 23, before the market opens.

In the last quarter, it delivered a positive earnings surprise of about 7.9% backed by a decent reduction in expenses. The company’s strategic measures and capital market moves have helped enhance flexibility, extend maturities and lower interest expenses. However, the question is - Will Prologis be able to keep the earnings streak alive? Let’s see how things have shaped up for this announcement.

Earnings Whispers

Our proven model conclusively shows that Prologis is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least Rank #2 or #3 for this to happen. Fortunately, Prologis has the right combination of these two key ingredients that is elaborated below.

Positive Zacks ESP:  The Earnings ESP for Prologis is +2.44%.  This is because the Most Accurate estimate stands at 42 cents while the Zacks Consensus Estimate is lower at 41 cents.
 
Zacks Rank: Prologis’ Zacks Rank #3 (Hold) enhances the predictive power of ESP. This combination of its Zacks Rank and Earnings ESP makes us confident of an earnings surprise call in the to-be-reported quarter.

What is Driving Better-than-Expected Earnings?

We believe that with a growing customer base, rise in e-Commerce application and supply chain consolidation, there is an increasing demand for Class-A facilities and Prologis stands to benefit as it has the capacity to offer modern distribution facilities in strategic infill locations. We expect this rising demand for Prologis’ facilities to drive its rent and occupancy in the third quarter. Its leasing activities are also progressing well.

The company is also making concerted efforts towards increasing its dominance in the industrial real estate market of Europe, which is encouraging. During the third quarter, the company penned a Build-to-Suit deal with Hi Logistics in UK for facilities spanning over 700,000 square feet. A similar agreement was inked with L'Oreal, the French cosmetics group for a 270,000 square feet space in France.

Also, it entered into a Build-to-Suit deal with Walmart.com Brazil - WMB Comercio Eletronico LTDA, a unit of Wal-Mart Stores Inc.’s (WMT - Analyst Report) global e-commerce organization for a distribution center, which would span 576,000 square foot in Sao Paulo, Brazil.

Yet, with the sluggish economic growth, we are not overtly optimistic on this stock. In fact, Prologis’ activities during the third quarter of the year were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 41 cents per share over the last 7 days.

Stocks to Consider

Here are a couple of stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Avalonbay Communities Inc. (AVB - Analyst Report) has an earnings ESP of +2.53 % and carries a Zacks Rank #3. It is scheduled to report third quarter results on Oct 23, 2013 after the market close.

The earnings ESP for Simon Property Group Inc. (SPG - Analyst Report) is +1.85% and it carries a Zacks Rank #3. The company is scheduled to release third quarter results before the opening bell on Oct 25, 2013.
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%