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Prologis, Inc. (PLD - Free Report) reported third-quarter 2018 core funds from operations (FFO) per share of 72 cents, beating the Zacks Consensus Estimate by a penny. Results also compare favorably with the year-ago figure of 67 cents.
The company witnessed solid top-line growth in the quarter, while period-end occupancy remained high. Moreover, this industrial real estate investment trust (REIT) narrowed its guidance for 2018 core FFO per share.
The company generated rental revenues of $609 million, which surpassed the Zacks Consensus Estimate of $587.2 million. It also compares favorably with the year-ago tally of $531.2 million.
Further, management noted that integration of the DCT Industrial acquisition on Aug 22 is complete and expected run rate of $80 million per year of immediate savings has already been attained.
Quarter in Detail
At the end of the reported quarter, occupancy level in the company’s owned and managed portfolio was 97.5%, expanding 120 basis points (bps) year over year. Specifically, occupancy of its portfolio in Europe was at 98%.
During the quarter under review, Prologis signed 37 million square feet of leases in its owned and managed portfolio compared with the 36 million square feet of area recorded in the year-ago period.
Prologis’ share of net effective rent change was 22.6% in the Jul-Sep quarter compared with 20.5% recorded a year ago. The figure was led by the U.S. portfolio, which recorded impressive growth of 30.4%. Cash rent change was 11.6%, as against 8.1% recorded in the year-earlier quarter.
Cash same-store net operating income (NOI) registered 5.9% growth compared with the 5.4% increase reported in the comparable period last year. This was led by 7.1% growth reported in the U.S. portfolio.
In third-quarter 2018, Prologis’ share of building acquisitions amounted to $86 million, with a weighted average stabilized cap rate of 5.0%. Development stabilization aggregated $290 million, while development starts totaled $388 million, with 34.8% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $462 million, with weighted average stabilized cap rate (excluding land and other real estate) of 4.9%.
Liquidity
Finally, the company exited the September quarter with cash and cash equivalents of $275.6 million, down from $527.8 million recorded at the end of the previous quarter. It had $3.5 billion of liquidity.
During the quarter under review, the company issued approximately $1.3 billion of yen- and euro-denominated bonds. The company’s concerted efforts helped it reduce its weighted average interest rate to 2.7% and extend the weighted average remaining term to 6.3 years.
Outlook
Prologis narrowed its guidance for 2018 core FFO per share to $3.01-$3.03 from the prior outlook of $3.00-$3.04. The Zacks Consensus Estimate for the same is currently pinned at $3.01.
Our Take
The stellar performance of Prologis in the just-reported quarter is encouraging. Given its balance-sheet strength and prudent financial management, the company remains well poised to grow as high consumer spending, e-commerce boom and a healthy manufacturing environment amid recovering economy and job market are spurring demand for the industrial real estate category.
The company is actively banking on growth opportunities, and the acquisition of DCT Industrial has strengthened its foothold in major high-growth markets of Southern California, the San Francisco Bay Area, Seattle and South Florida.
Furthermore, Prologis recently accomplished the sale of $1.1-billion portfolio, comprising buildings and land in Europe and the United States. The move comes as part of the company’s effort to align its portfolio with its long-term investment strategy. Its share of the proceeds aggregated around $610 million. Such efforts are likely to drive long-term growth.
Nonetheless, a whole lot of new buildings are slated to be completed and made available in the market in the near term. Also, rate hikes remain another concern.
We now look forward to the earnings releases of other REITs like SL Green Realty Corp. (SLG - Free Report) , Crown Castle International Corp. (CCI - Free Report) and Equity Residential (EQR - Free Report) . SL Green and Crown Castle are slated to report third-quarter earnings on Oct 17, while Equity Residential has earnings release scheduled for Oct 23.
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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Prologis (PLD) Beats Q3 FFO Estimates, Narrows Guidance
Prologis, Inc. (PLD - Free Report) reported third-quarter 2018 core funds from operations (FFO) per share of 72 cents, beating the Zacks Consensus Estimate by a penny. Results also compare favorably with the year-ago figure of 67 cents.
The company witnessed solid top-line growth in the quarter, while period-end occupancy remained high. Moreover, this industrial real estate investment trust (REIT) narrowed its guidance for 2018 core FFO per share.
The company generated rental revenues of $609 million, which surpassed the Zacks Consensus Estimate of $587.2 million. It also compares favorably with the year-ago tally of $531.2 million.
Further, management noted that integration of the DCT Industrial acquisition on Aug 22 is complete and expected run rate of $80 million per year of immediate savings has already been attained.
Quarter in Detail
At the end of the reported quarter, occupancy level in the company’s owned and managed portfolio was 97.5%, expanding 120 basis points (bps) year over year. Specifically, occupancy of its portfolio in Europe was at 98%.
During the quarter under review, Prologis signed 37 million square feet of leases in its owned and managed portfolio compared with the 36 million square feet of area recorded in the year-ago period.
Prologis’ share of net effective rent change was 22.6% in the Jul-Sep quarter compared with 20.5% recorded a year ago. The figure was led by the U.S. portfolio, which recorded impressive growth of 30.4%. Cash rent change was 11.6%, as against 8.1% recorded in the year-earlier quarter.
Cash same-store net operating income (NOI) registered 5.9% growth compared with the 5.4% increase reported in the comparable period last year. This was led by 7.1% growth reported in the U.S. portfolio.
In third-quarter 2018, Prologis’ share of building acquisitions amounted to $86 million, with a weighted average stabilized cap rate of 5.0%. Development stabilization aggregated $290 million, while development starts totaled $388 million, with 34.8% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $462 million, with weighted average stabilized cap rate (excluding land and other real estate) of 4.9%.
Liquidity
Finally, the company exited the September quarter with cash and cash equivalents of $275.6 million, down from $527.8 million recorded at the end of the previous quarter. It had $3.5 billion of liquidity.
During the quarter under review, the company issued approximately $1.3 billion of yen- and euro-denominated bonds. The company’s concerted efforts helped it reduce its weighted average interest rate to 2.7% and extend the weighted average remaining term to 6.3 years.
Outlook
Prologis narrowed its guidance for 2018 core FFO per share to $3.01-$3.03 from the prior outlook of $3.00-$3.04. The Zacks Consensus Estimate for the same is currently pinned at $3.01.
Our Take
The stellar performance of Prologis in the just-reported quarter is encouraging. Given its balance-sheet strength and prudent financial management, the company remains well poised to grow as high consumer spending, e-commerce boom and a healthy manufacturing environment amid recovering economy and job market are spurring demand for the industrial real estate category.
The company is actively banking on growth opportunities, and the acquisition of DCT Industrial has strengthened its foothold in major high-growth markets of Southern California, the San Francisco Bay Area, Seattle and South Florida.
Furthermore, Prologis recently accomplished the sale of $1.1-billion portfolio, comprising buildings and land in Europe and the United States. The move comes as part of the company’s effort to align its portfolio with its long-term investment strategy. Its share of the proceeds aggregated around $610 million. Such efforts are likely to drive long-term growth.
Nonetheless, a whole lot of new buildings are slated to be completed and made available in the market in the near term. Also, rate hikes remain another concern.
Prologis currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Prologis, Inc. Price, Consensus and EPS Surprise
Prologis, Inc. Price, Consensus and EPS Surprise | Prologis, Inc. Quote
We now look forward to the earnings releases of other REITs like SL Green Realty Corp. (SLG - Free Report) , Crown Castle International Corp. (CCI - Free Report) and Equity Residential (EQR - Free Report) . SL Green and Crown Castle are slated to report third-quarter earnings on Oct 17, while Equity Residential has earnings release scheduled for Oct 23.
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 first 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 >>