It has been about a month since the last earnings report for Prologis (
PLD Quick Quote PLD - Free Report) . Shares have added about 4.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Prologis due for a pullback? 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.
Prologis Beats Q2 FFO Estimates, Raises 2021 Guidance
Prologishas reported second-quarter 2021 core FFO per share of $1.01, beating the Zacks Consensus Estimate of 99 cents.
Results reflect all-time low vacancies in its markets that aided rent growth and valuation increases. Further, the industrial REIT raised the 2021 outlook. However, it compares unfavorably with the year-ago quarter’s figure of $1.11 as the year-earlier period result included 23 cents per share of net promote income compared to none in second-quarter 2021. Prologis generated rental revenues of $1,014.8 million, up from the prior-year quarter’s $944.4 million. The Zacks Consensus Estimate for the same was pegged at $1,029.1 million. Total revenues were $1.15 billion, up from the year-ago quarter’s $1.27 billion. Per Hamid R. Moghadam, chairman and CEO of the company, "Demand for logistics space is robust and diverse, and operating conditions remain the healthiest in our 38-year history." With respect to the company’s guidance, Thomas S. Olinger, the chief financial officer noted, "We increased our guidance again across the board and now expect year-over-year Core FFO growth at the midpoint, excluding promotes, of 12.8 percent and free cash flow after dividends of approximately $1.3 billion." Quarter in Detail
Average occupancy level in Prologis’ owned-and-managed portfolio was 96% in the second quarter, expanding 60 bps from first-quarter 2021. In the quarter under review, 49 million square feet of leases commenced in the company’s owned and managed portfolio, with 44.9 million square feet in the operating portfolio and 4.1 million square feet in the development portfolio. Retention level was 70.8% in the quarter and reflects the company’s strategy to deliver high rent change.
Prologis’ share of net effective rent change was 31.5% in the April-June quarter. Cash rent change was 15.5%. Cash same-store NOI grew 5.8% and was driven by the United States at 5.6% and International at 6.6%. The company’s share of building acquisitions amounted to $128 million, with a weighted average stabilized cap rate of 4.0% in the reported quarter. Development stabilization aggregated $687 million, while development starts totaled $610 million, with 12.5% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $1.12 billion, with a weighted average stabilized cap rate (excluding land and other real estates) of 4.6%. Liquidity
Prologis exited second-quarter 2021 with cash and cash equivalents of $601.4 million, down from the $676.1 million reported at the end of first-quarter 2021. Debt, as a percentage of total market capitalization, was 17.4%. The company's weighted average rate on its share of total debt was 1.8%, with a weighted average term of 10.7 years. The combined investment capacity of Prologis and its open-ended ventures, in line with their current credit ratings, is roughly $14 billion.
The company and its co-investment ventures issued $3.8 billion of debt in the second quarter. This included $658 million in green bond raises. Outlook
Prologis has revised its 2021 core FFO per share guidance to $4.04-$4.08 from the $3.96-$4.02 mentioned earlier, marking an 1.8% increase at the mid-point.
The company expects average occupancy of 96.25-96.75%, unrevised compared to the previously-stated range. Cash same-store NOI (Prologis share) is projected at 5.25-5.75%, up 75 bps at the mid-point from the previously-mentioned figure. Moreover, the company anticipates $700-$900 million of building acquisitions at Prologis share compared with the $600-$800 million stated earlier. Development starts are expected to be $3,050-$3,350 million compared with the $2,750-$3,050 million mentioned earlier. How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
Currently, Prologis has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
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.