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Why Should You Add Prologis (PLD) to Your Portfolio Now?

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If the recent rate hike has deterred you from investing in REIT stocks, then you should reconsider your decision. This is because some of the asset categories in the real estate market are displaying robust fundamentals and promising decent returns.

One such asset category is the industrial real estate that is witnessing solid demand amid an economic recovery, growth of e-commerce and U.S.-based manufacturing. This, in turn, is driving demand for warehouse space, as companies are compelled to enhance and renovate their distribution and production platforms.

Therefore, this is the right time to add a few industrial REITs to your portfolio. Today, we bring one such stock – Prologis Inc. (PLD - Free Report) – that continues to depict strong fundamentals and improving prospects.

The company’s occupancy remained high in first-quarter 2017. In fact, demand for its facilities was fueled by growth in the housing, construction and e-commerce businesses. Moreover, market conditions in Europe continue to improve. In addition, Prologis remains focused on bolstering its liquidity.

Further, this Zacks Rank #2 (Buy) stock has risen over 15.9% in the past three months compared with just 5.4% growth recorded by the Zacks categorized REIT and Equity Trust - Other industry.



Why a Solid Choice?

Revenue Strength: Prologis’ top line has been exhibiting strength for the past several quarters. In fact, since first-quarter 2015 through first-quarter 2017, the company reported better-than-expected revenue figures in each quarter. Given the strength in its fundamentals, this trend is likely to continue ahead.

Cash Flow Growth: Prologis enjoyed a historical cash flow growth (3–5 years) of 30.8%, which comfortably exceeded the industry’s growth of 17.6%. Also, the company’s current cash flow growth of 22.5% is way ahead of the industry’s rate of 15.7%.

FFO per Share Growth: Prologis witnessed 7.2% growth in funds from operations (FFO) per share over the last three–five years against 2.9% of that of the industry. Further, FFO per share is estimated to grow at the rate of 7.1% for 2017, which is significantly ahead of the industry average of 1.64%. Also, FFO per share is anticipated to grow at a rate of 4.5% in 2018.

Strong Leverage: The debt-to-equity ratio for Prologis is 0.62 compared with the industry average of 0.83. This highlights greater financial stability for the company and lesser risk for shareholders.

Other Key Picks

Other top-ranked stocks in the real estate space include Liberty Property Trust , PS Business Parks, Inc. and Whitestone REIT (WSR - Free Report) . All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Liberty Property Trust and PS Business Parks have long-term growth rates of 6% and 5%, respectively.

Whitestone REIT’s FFO per share estimates for 2017 have moved up 4.0% to $1.05, over the past 60 days.

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share. FFO, 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.


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