A month has gone by since the last earnings report for Prologis (PLD Quick QuotePLD - Free Report) . Shares have lost about 1.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Prologis' Q3 FFO & Revenues Top Estimates, View Up

Prologisreported third-quarter 2020 core FFO per share of 90 cents, beating the Zacks Consensus Estimate of 88 cents. However, results compared unfavorably with the year-ago figure of 97 cents. Excluding net promote income, core FFO per share came in at 92 cents in the quarter, up from the year-ago period’s 79 cents.

This better-than-expected performance was driven by decent growth in rental income.

Prologis generated rental revenues of $980.1 million, up 38% from the prior-year quarter. The figure also surpassed the Zacks Consensus Estimate of $957.6 million. The company also revised its full-year core FFO per share guidance northward compared with the estimate issued in July.

According to Hamid R. Moghadam, chairman and CEO of the company, activity in the company’s portfolio is “robust and broadening – a reflection of increased demand in the quarter across multiple sectors, the adoption of e-commerce and the need for higher levels of inventory."

With respect to management’s guidance, the chief financial officer noted that "outlook continues to improve based on results, leasing and lower credit losses.” He also pointed that the company continues to “maintain significant dividend coverage of 1.6x and expect 2020 free cash flow after dividends of $1.1 billion.”

Quarter in Detail

At the end of the reported quarter, occupancy level in Prologis’ owned-and-managed portfolio was 95.6%. During the third quarter, 48.8 million square feet of leases commenced in the company’s owned-and-managed portfolio, with 41.7 million square feet being in the operating portfolio and 7.1 million square feet in the development portfolio. However, retention level was 72.8% in the quarter, marking a contraction of 810 basis points (bps) from the prior quarter.

Prologis’ share of net effective rent change was 25.9% during the July-September quarter, driven by the United States at 30.7%. Cash rent change was 11.7%. Cash same-store net operating income (NOI) registered 2.2% growth and was affected by 110 bps of lower average occupancy and 35 bps of bad debt.

Prologis’ share of building acquisitions amounted to $195 million, with a weighted average stabilized cap rate of 4.3% during the reported quarter. Development stabilization aggregated $554 million, while development starts totaled $392 million, with 87.5% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $578 million, with weighted average stabilized cap rate (excluding land and other real estate) of 4.5%.

Liquidity

Prologis exited the September-end quarter with cash and cash equivalents of $940.2 million, up from the $549.1 million recorded at the end of second-quarter 2020. Debt, as a percentage of total market capitalization, was 19.2%, while the company's weighted average rate on its share of total debt was 2.1%, with a weighted average remaining term of 9.9 years.

The combined investment capacity of Prologis and its open-ended vehicles, at levels in line with their current credit ratings, is $13 billion. Prologis and its co-investment ventures accomplished $2.4 billion of debt refinancing during the July-September quarter, at a weighted average rate of 1.4% and a weighted average term of 12 years.

Outlook

Prologis projects 2020 core FFO per share at $3.76-$3.78 compared with the July guidance of $3.70-$3.75.

It forecasts year-end occupancy of 95.25-95.75% compared with the 95-96% guided earlier. Cash same-store NOI (Prologis share) is projected at 2.75-3.25% compared with the 2.5-3.5% expected earlier.

Moreover, the company anticipates $700-$800 million of building acquisitions compared with the $500-$600 million projected earlier, while development starts are expected to be $1,600-$2,000 million as against the prior estimate of $800-$1,200 million for this year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Prologis has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Prologis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.