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Why Is Prologis (PLD) Up 3.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Prologis (PLD - Free Report) . Shares have added about 3.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Prologis due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Prologis’ FFO and Revenues Surpass Estimates in Q4

Prologis reported fourth-quarter 2022 core FFO per share of $1.24, beating the Zacks Consensus Estimate of $1.21. The figure climbed 10.7% from the year-ago quarter.

The quarterly results reflected better-than-anticipated revenues driven by healthy leasing activity and solid rent growth. In addition, this industrial REIT issued its 2023 outlook.

Prologis generated rental revenues of $1.59 billion, up from the prior-year quarter’s $1.07 billion. Moreover, the figure surpassed the Zacks Consensus Estimate of $1.41 billion. The total revenues came in at $1.75 billion, increasing 37.2% year over year.

Per Hamid R. Moghadam, co-founder and CEO of Prologis, “Our results underscore the strength of our business in the face of a slowing economy. Despite the challenging economic environment, we are focused on serving our customers through the scale and quality of our portfolio, our growing Essentials offerings, and dedication of the best team in the business.”

For 2022, the company reported core FFO per share of $5.16, up 24.3% from the prior year. The figure also beat the Zacks Consensus Estimate of $5.13. Rental revenues of $4.93 billion increased 18.4% year over year and also exceeded the consensus mark of $4.76 billion.

Quarter in Detail

The average occupancy level in Prologis’ owned and managed portfolio was 98% in the fourth quarter, rising 30 basis points from the previous quarter.

In the quarter under review, 42.5 msf of leases commenced in the company’s owned and managed portfolio, with 36.9 msf in the operating portfolio and 5.6 msf in the development portfolio. Moreover, the retention level was 82.4% in the quarter, up from 76.4% reported at the end of the prior quarter.

Prologis’ share of net effective rent change came in at 50.6% in the fourth quarter, which was led by the United States at 55%. The cash rent change was 32.4%. The cash same-store NOI was 9.1%. The growth was led by the United States at 9.6%.

The company’s share of building acquisitions totaled $181 million, with a weighted average stabilized cap rate (excluding other real estate) of 5.9% in the reported quarter. The development stabilization aggregated $820 million, while development starts amounted to $846 million, with 50.8% being built to suit. PLD’s total dispositions and contributions were $310 million, with a weighted average stabilized cap rate (excluding land and other real estate) of 4.2%.

Liquidity

Prologis exited fourth-quarter 2022 with cash and cash equivalents of $278.5 million, down from $636.3 million at the end of the third quarter. Its liquidity amounted to around $4.1 billion in cash and availability on its credit facilities.

As of Dec 31, 2022, debt, as a percentage of the total market capitalization, was 20.1%. The company's weighted average interest rate on its share of the total debt was 2.5%, with a weighted average term of 9.1 years. The company and its co-investment ventures issued $1.1 billion of debt in the fourth quarter at a weighted average interest rate of 3%.

2023 Outlook

Prologis provided its 2023 core FFO per share guidance in the range of $5.40-$5.50.

The company expects average occupancy to lie between 96.5% and 97.5%. Cash same-store NOI (Prologis share) is projected in the range of 8.5-9.5%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Prologis has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Prologis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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