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Why Is Prologis (PLD) Down 1.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Prologis (PLD - Free Report) . Shares have lost about 1.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Prologis due for a breakout? 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 Q3 FFO Tops Estimates on Rent Growth, View Up
Prologis reported third-quarter 2019 core FFO per share of 97 cents, beating the Zacks Consensus Estimate of 93 cents. Results also compare favorably with the year-ago figure of 72 cents. Notably, the company had net promote income of 18 cents in the just-reported quarter, while no promotes were earned in the year-ago period.
The company witnessed rent growth in the third quarter, but period-end occupancy moderated slightly as the company prioritized rent over occupancy. Moreover, results reflect substantial earnings from the company’s strategic capital business. The industrial REIT also raised its guidance for 2019 core FFO per share.
Prologis generated rental revenues of $710.5 million, which registered 16.7% growth from the prior-year quarter. However, the figure narrowly missed the Zacks Consensus Estimate of $713.2 million.
Quarter in Detail
At the end of the reported quarter, occupancy level in the company’s owned-and-managed portfolio was 96.5%, down 100 basis points year over year, indicating the company’s strategy of prioritizing rent over occupancy. However, during the quarter, 38 million square feet of leases commenced in the company’s owned-and-managed portfolio, up from 37 million square feet in the year-ago period.
Prologis’ share of net effective rent change was 37% in the July-September quarter compared with 22.6% recorded a year ago. This was driven by the United States at 41.7%. Cash rent change was 21.4%, as against 11.6% recorded in the year-earlier quarter. However, cash same-store NOI registered 4.3% growth compared with the 5.9% increase reported in the comparable period last year, with the company emphasizing on rent over occupancy.
In third-quarter 2019, Prologis’ share of building acquisitions amounted to $191 million, with a weighted average stabilized cap rate of 4.3%. Development stabilization aggregated $658 million, while development starts totaled $577 million, with 63.6% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $498 million, with weighted average stabilized cap rate (excluding land and other real estate) of 4.8%.
Liquidity
The company exited the September-end quarter with cash and cash equivalents of $1.02 billion, up from the $401.2 million recorded at the end of the previous quarter. Prologis ended the quarter with leverage of 18.4% on a market capitalization basis and debt-to-adjusted EBITDA of 3.9x and $4.9 billion of liquidity.
Notably, during the reported quarter, the company and its co-investment ventures issued $2.8 billion of debt, mainly in euros. This was done at a weighted average fixed interest rate of less than 1% and a weighted average term of more than 14 years.
Outlook Raised
Prologis raised its core FFO per share outlook for full-year 2019. The company projects core FFO per share of $3.30-$3.32, up from the $3.26-$3.30 estimated earlier.
The company forecasts year-end occupancy of 96.5-97.0% against the prior projection of 96.5-97.5%, and cash same-store NOI (Prologis share) of 4.75-5.0% compared with the prior projection of 4.5-5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
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 lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Prologis has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Prologis (PLD) Down 1.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Prologis (PLD - Free Report) . Shares have lost about 1.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Prologis due for a breakout? 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 Q3 FFO Tops Estimates on Rent Growth, View Up
Prologis reported third-quarter 2019 core FFO per share of 97 cents, beating the Zacks Consensus Estimate of 93 cents. Results also compare favorably with the year-ago figure of 72 cents. Notably, the company had net promote income of 18 cents in the just-reported quarter, while no promotes were earned in the year-ago period.
The company witnessed rent growth in the third quarter, but period-end occupancy moderated slightly as the company prioritized rent over occupancy. Moreover, results reflect substantial earnings from the company’s strategic capital business. The industrial REIT also raised its guidance for 2019 core FFO per share.
Prologis generated rental revenues of $710.5 million, which registered 16.7% growth from the prior-year quarter. However, the figure narrowly missed the Zacks Consensus Estimate of $713.2 million.
Quarter in Detail
At the end of the reported quarter, occupancy level in the company’s owned-and-managed portfolio was 96.5%, down 100 basis points year over year, indicating the company’s strategy of prioritizing rent over occupancy. However, during the quarter, 38 million square feet of leases commenced in the company’s owned-and-managed portfolio, up from 37 million square feet in the year-ago period.
Prologis’ share of net effective rent change was 37% in the July-September quarter compared with 22.6% recorded a year ago. This was driven by the United States at 41.7%. Cash rent change was 21.4%, as against 11.6% recorded in the year-earlier quarter. However, cash same-store NOI registered 4.3% growth compared with the 5.9% increase reported in the comparable period last year, with the company emphasizing on rent over occupancy.
In third-quarter 2019, Prologis’ share of building acquisitions amounted to $191 million, with a weighted average stabilized cap rate of 4.3%. Development stabilization aggregated $658 million, while development starts totaled $577 million, with 63.6% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $498 million, with weighted average stabilized cap rate (excluding land and other real estate) of 4.8%.
Liquidity
The company exited the September-end quarter with cash and cash equivalents of $1.02 billion, up from the $401.2 million recorded at the end of the previous quarter. Prologis ended the quarter with leverage of 18.4% on a market capitalization basis and debt-to-adjusted EBITDA of 3.9x and $4.9 billion of liquidity.
Notably, during the reported quarter, the company and its co-investment ventures issued $2.8 billion of debt, mainly in euros. This was done at a weighted average fixed interest rate of less than 1% and a weighted average term of more than 14 years.
Outlook Raised
Prologis raised its core FFO per share outlook for full-year 2019. The company projects core FFO per share of $3.30-$3.32, up from the $3.26-$3.30 estimated earlier.
The company forecasts year-end occupancy of 96.5-97.0% against the prior projection of 96.5-97.5%, and cash same-store NOI (Prologis share) of 4.75-5.0% compared with the prior projection of 4.5-5%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
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 lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Prologis has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.