It has been about a month since the last earnings report for Duke Realty . Shares have lost about 2.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Duke Realty 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 catalysts.
Duke Realty Q2 FFO & Revenues Top Estimates, View Up
Duke Realty’s second-quarter 2020 core FFO per share of 38 cents surpassed the Zacks Consensus Estimate of 37 cents. The figure also increased from the year-ago tally of 36 cents.
Results reflect rent growth on new and renewal leases, higher in-service occupancy and leasing of new developments.
The company noted that despite the uncertain economic conditions, it has a more optimistic outlook for current-year earnings compared with the guidance issued in April. This positive outlook is backed by operational performance, and particularly strong rent collections so far. Notably, the company has collected or has executed deferral agreements for 99.9% of second-quarter rents and 99.9% of July rents.
Rental and related revenues of $226.4 million increased 6.2% on a year-over-year basis. Also, the figure surpassed the Zacks Consensus Estimate of $221.3 million.
Quarter in Detail
Duke Realty leased 7.6 million square feet of space during the June-end quarter, including 1.4 million square feet of short-term leases. Tenant retention was 75.1% for the second quarter and 95.9% after considering immediate backfills.
Moreover, the company registered same-property NOI growth of 5% year over year. This uptick was backed by increased occupancy and rental rate growth as well as the expiration of free rent periods. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 10.7% and 26.6%, respectively, during the quarter.
As of Jun 30, 2020, the company’s total portfolio, including properties under development, was 95.3% leased, up 100 basis points (bps) from the previous-quarter end, and up 190 bps from the prior-year quarter end.
Increase in total portfolio occupancy reflects leasing of speculative space in both in-service and under-development portfolios. In-service portfolio was 96.7% leased as of Jun 30, 2020, up from 96.5% as of Mar 31, 2020 and 95.4% as of Jun 30, 2019.
Duke Realty exited the second quarter with $29.9 million of cash and cash equivalents, down from $110.9 million as of Dec 31, 2019.
Portfolio Activity
During the quarter, the company placed eight new consolidated projects, and one expansion to an existing project, aggregating 3.2 million square feet. These projects were 82% leased in total.
However, the company did not commence any new developments during the April-June quarter, as it made a temporary halt on speculative developments. Nonetheless, the company is working with a list of prospective tenants and anticipates more build-to-suit developments to be commenced in the second half of this year.
2020 Guidance
Duke Realty revised the 2020 core FFO per share outlook to $1.48-$1.54 from the prior estimate of $1.41-$1.51.
The company estimates same-property NOI growth of 3.5-4.5% compared with the prior guidance of 1.75-3.25%. It has lowered its bad debt expense estimate and included improved leasing assumption compared with the April outlook. Moreover, the revised guidance for 2020 development starts is $350-$550 million compared with the prior range of $275-$425 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Duke Realty has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 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 looks promising. It comes with little surprise Duke Realty has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Image: Bigstock
Duke Realty (DRE) Down 2.6% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Duke Realty . Shares have lost about 2.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Duke Realty 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 catalysts.
Duke Realty Q2 FFO & Revenues Top Estimates, View Up
Duke Realty’s second-quarter 2020 core FFO per share of 38 cents surpassed the Zacks Consensus Estimate of 37 cents. The figure also increased from the year-ago tally of 36 cents.
Results reflect rent growth on new and renewal leases, higher in-service occupancy and leasing of new developments.
The company noted that despite the uncertain economic conditions, it has a more optimistic outlook for current-year earnings compared with the guidance issued in April. This positive outlook is backed by operational performance, and particularly strong rent collections so far. Notably, the company has collected or has executed deferral agreements for 99.9% of second-quarter rents and 99.9% of July rents.
Rental and related revenues of $226.4 million increased 6.2% on a year-over-year basis. Also, the figure surpassed the Zacks Consensus Estimate of $221.3 million.
Quarter in Detail
Duke Realty leased 7.6 million square feet of space during the June-end quarter, including 1.4 million square feet of short-term leases. Tenant retention was 75.1% for the second quarter and 95.9% after considering immediate backfills.
Moreover, the company registered same-property NOI growth of 5% year over year. This uptick was backed by increased occupancy and rental rate growth as well as the expiration of free rent periods. Duke Realty reported overall cash and annualized net effective rent growth on new and renewal leases of 10.7% and 26.6%, respectively, during the quarter.
As of Jun 30, 2020, the company’s total portfolio, including properties under development, was 95.3% leased, up 100 basis points (bps) from the previous-quarter end, and up 190 bps from the prior-year quarter end.
Increase in total portfolio occupancy reflects leasing of speculative space in both in-service and under-development portfolios. In-service portfolio was 96.7% leased as of Jun 30, 2020, up from 96.5% as of Mar 31, 2020 and 95.4% as of Jun 30, 2019.
Duke Realty exited the second quarter with $29.9 million of cash and cash equivalents, down from $110.9 million as of Dec 31, 2019.
Portfolio Activity
During the quarter, the company placed eight new consolidated projects, and one expansion to an existing project, aggregating 3.2 million square feet. These projects were 82% leased in total.
However, the company did not commence any new developments during the April-June quarter, as it made a temporary halt on speculative developments. Nonetheless, the company is working with a list of prospective tenants and anticipates more build-to-suit developments to be commenced in the second half of this year.
2020 Guidance
Duke Realty revised the 2020 core FFO per share outlook to $1.48-$1.54 from the prior estimate of $1.41-$1.51.
The company estimates same-property NOI growth of 3.5-4.5% compared with the prior guidance of 1.75-3.25%. It has lowered its bad debt expense estimate and included improved leasing assumption compared with the April outlook. Moreover, the revised guidance for 2020 development starts is $350-$550 million compared with the prior range of $275-$425 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Duke Realty has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 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 looks promising. It comes with little surprise Duke Realty has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.