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Prologis (PLD) Down 30.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Prologis (PLD - Free Report) . Shares have lost about 30.8% 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 catalysts.

Prologis Beats Q1 FFO Estimates, Issues Upbeat View

Prologis reported first-quarter 2022 core FFO per share of $1.09, beating the Zacks Consensus Estimate of $1.08. This also compares favorably with the year-ago quarter’s figure of 97 cents.

Results reflect solid demand for industrial real estate, leading to low vacancies and an increase in rents. Further, this industrial REIT issued an upbeat 2022 guidance.

Prologis generated rental revenues of $1.076 billion, up from the prior-year quarter’s $1.021 billion. However, PLD missed the Zacks Consensus Estimate of $1.087 billion. Total revenues were $1.2 billion, up from the year-ago quarter’s $1.1 billion.

Per Hamid R. Moghadam, co-founder and chief executive officer of the company, "The need for resilience in the supply chain continues to drive record demand despite today's economic and geopolitical risks."

Quarter in Detail

The average occupancy level in Prologis’ owned and managed portfolio was 97.4% in the first quarter. Moreover, the company’s owned and managed portfolio was 98.1% leased as of Mar 31, 2022.

In the quarter under review, 52.2 million square feet of leases commenced in the company’s owned and managed portfolio, with 49.0 million square feet in the operating portfolio and 3.2 million square feet in the development portfolio. The retention level was 75.4% in the quarter.

Prologis’ share of net effective rent change was 37.0% in the January-March quarter, which was led by the United States at 41.5%. Cash rent change was 19.2%. Cash same-store net operating income (NOI) grew 8.7%, which was led by the United States at 9.7%.

The company’s share of building acquisitions amounted to $98 million, with a weighted average stabilized cap rate of 3.7% in the reported quarter. Development stabilization aggregated $212 million, while development starts totaled $1.02 billion, with 36.6% being build to suit. PLD’s total dispositions and contributions were $1.53 billion, with a weighted average stabilized cap rate (excluding land and other real estate) of 4.0%.

Liquidity

Prologis exited the first quarter of 2022 with cash and cash equivalents of $1.9 billion, up from $556.1 million at the end of the prior year. Its liquidity amounted to $6.8 billion in cash and availability on its credit facilities.

Debt, as a percentage of the total market capitalization, was 13.5%. The company's weighted average interest rate on its share of the total debt was 1.7%, with a weighted average term of 10.0 years. The combined investment capacity of Prologis and its open-ended ventures, in line with their current ratings, is roughly $18 billion. The company and its co-investment ventures issued $2.6 billion of debt in the first quarter at a weighted average interest rate of 1.5%.

Guidance

Prologis raised its 2022 core FFO per share guidance to the range of $5.10-$5.16 from the $5.00-$5.10 range guided earlier, indicating a 1.6% increase at the midpoint.

The company expects average occupancy in the band of 96.75-97.50%, up 12.5 basis points at the midpoint. Cash same-store NOI (Prologis share) is projected at 7.25-8.00% compared with the 6-7% band guided earlier.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Prologis has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth 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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