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Duke Realty's (DRE) Q2 FFO & Revenues Top Estimates, View Up
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Duke Realty Corporation’s second-quarter 2018 core funds from operations (FFO) per share of 33 cents came in line with the Zacks Consensus Estimate. Moreover, the figure came in a cent higher than the year-ago tally.
Notably, the company used part of the medical office business (MOB) sale proceeds to reduce debt and interest expense. It also reinvested the proceeds in new industrial properties and for improving overall operations. These measures boosted Duke Realty’s core FFO tally. However, this upside was partly negated by the significant amount contributed by the pre-sale operations of the company’s medical office assets in the previous year.
Total revenues of $210.6 million in the reported quarter jumped 11.2% on a year-over-year basis, handily surpassing the Zacks Consensus Estimate of $196.6 million.
Duke Realty Corporation Price, Consensus and EPS Surprise
Duke Realty leased around 7.8 million square feet of space in the June-end quarter. Its tenant retention for the quarter was 74.7%. Moreover, it registered same-property net operating income growth of 3.9% year over year. In fact, the company reported overall cash and annualized net effective rent growth related to new and renewal leases of 9.2% and 22.1%, respectively.
As of Jun 30, 2018, the company’s total occupancy, including properties under development, was 94%, down 40 basis points (bps) from the prior-quarter end. In-service occupancy, as of the same date, was 97.4%, up 40 bps from the prior-quarter figure.
Notably, the company initiated developments totaling 5.7 million square feet of space, worth $393 million, of which 53% was pre-leased.
Duke Realty exited the second quarter with $86.3 million of cash and cash equivalents, significantly up from $67.6 million as of Dec 31, 2017.
2018 Guidance
Duke Realty increased its 2018 guidance for core FFO per share to $1.29-$1.35, from $1.26-$1.32. The Zacks Consensus Estimate for the same is currently pegged at $1.30.
Notably, the company’s guidance is based on faster-than-anticipated leasing of its speculative pipeline and efficient utilization of MOB sale proceeds into new developments.
Dividend Update
Concurrent with its earnings release, Duke Realty announced a quarterly cash dividend on common stock of 20 cents per share. The Q2 dividend will be paid on Aug 31 to shareholders of record as of Aug 16, 2018.
Our Viewpoint
We are impressed by the healthy leasing activity reported by the company in the April-June quarter. Further, efficient utilization of sale proceeds will likely boost its performance, going forward.
Nonetheless, recovery in the industrial market has continued for long and we anticipate low chances of any striking decrease in availability rates. Additionally, with a whole lot of new buildings slated to be completed and made available in the market in the near term, supply will likely increase. This is expected to impact rent and occupancy growth.
Hence, Duke Realty’s extensive development pipeline may not enjoy robust leasing activity, impacting the company’s long-term outlook. Also evident in its core FFO performance is the drag due to sale of MOB.
Currently, Duke Realty has a Zacks Rank #4 (Sell).
We now look forward to the earnings releases of other REITs like Vornado Realty Trust (VNO - Free Report) , Boston Properties (BXP - Free Report) and Extra Space Storage (EXR - Free Report) . While Vornado will report Q2 figures on Jul 30, the other two companies are scheduled to release their quarterly numbers on Jul 31.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's second trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Duke Realty's (DRE) Q2 FFO & Revenues Top Estimates, View Up
Duke Realty Corporation’s second-quarter 2018 core funds from operations (FFO) per share of 33 cents came in line with the Zacks Consensus Estimate. Moreover, the figure came in a cent higher than the year-ago tally.
Notably, the company used part of the medical office business (MOB) sale proceeds to reduce debt and interest expense. It also reinvested the proceeds in new industrial properties and for improving overall operations. These measures boosted Duke Realty’s core FFO tally. However, this upside was partly negated by the significant amount contributed by the pre-sale operations of the company’s medical office assets in the previous year.
Total revenues of $210.6 million in the reported quarter jumped 11.2% on a year-over-year basis, handily surpassing the Zacks Consensus Estimate of $196.6 million.
Duke Realty Corporation Price, Consensus and EPS Surprise
Duke Realty Corporation Price, Consensus and EPS Surprise | Duke Realty Corporation Quote
Quarter in Detail
Duke Realty leased around 7.8 million square feet of space in the June-end quarter. Its tenant retention for the quarter was 74.7%. Moreover, it registered same-property net operating income growth of 3.9% year over year. In fact, the company reported overall cash and annualized net effective rent growth related to new and renewal leases of 9.2% and 22.1%, respectively.
As of Jun 30, 2018, the company’s total occupancy, including properties under development, was 94%, down 40 basis points (bps) from the prior-quarter end. In-service occupancy, as of the same date, was 97.4%, up 40 bps from the prior-quarter figure.
Notably, the company initiated developments totaling 5.7 million square feet of space, worth $393 million, of which 53% was pre-leased.
Duke Realty exited the second quarter with $86.3 million of cash and cash equivalents, significantly up from $67.6 million as of Dec 31, 2017.
2018 Guidance
Duke Realty increased its 2018 guidance for core FFO per share to $1.29-$1.35, from $1.26-$1.32. The Zacks Consensus Estimate for the same is currently pegged at $1.30.
Notably, the company’s guidance is based on faster-than-anticipated leasing of its speculative pipeline and efficient utilization of MOB sale proceeds into new developments.
Dividend Update
Concurrent with its earnings release, Duke Realty announced a quarterly cash dividend on common stock of 20 cents per share. The Q2 dividend will be paid on Aug 31 to shareholders of record as of Aug 16, 2018.
Our Viewpoint
We are impressed by the healthy leasing activity reported by the company in the April-June quarter. Further, efficient utilization of sale proceeds will likely boost its performance, going forward.
Nonetheless, recovery in the industrial market has continued for long and we anticipate low chances of any striking decrease in availability rates. Additionally, with a whole lot of new buildings slated to be completed and made available in the market in the near term, supply will likely increase. This is expected to impact rent and occupancy growth.
Hence, Duke Realty’s extensive development pipeline may not enjoy robust leasing activity, impacting the company’s long-term outlook. Also evident in its core FFO performance is the drag due to sale of MOB.
Currently, Duke Realty has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We now look forward to the earnings releases of other REITs like Vornado Realty Trust (VNO - Free Report) , Boston Properties (BXP - Free Report) and Extra Space Storage (EXR - Free Report) . While Vornado will report Q2 figures on Jul 30, the other two companies are scheduled to release their quarterly numbers on Jul 31.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's second trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>