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Why Is Prologis (PLD) Down 2% 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 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 drivers.
Prologis Beats Q1 FFO Estimates on Solid Rent Growth
Prologis reported first-quarter 2023 core FFO per share of $1.22, beating the Zacks Consensus Estimate of $1.21. This also compares favorably with the year-ago quarter’s figure of $1.09.
Results reflected solid demand for industrial real estate, leading to low vacancies and an increase in rents. The industrial REIT raised the midpoint of its 2023 guidance.
Prologis generated rental revenues of $1.633 billion, which surpassed the Zacks Consensus Estimate of $1.625 billion. The figure also increased from the $1.076 billion reported in the year-ago period. Total revenues were $1.77 billion, up from the year-ago quarter’s $1.22 billion.
Per Hamid R. Moghadam, the co-founder and chief executive officer of the company, " Given the macroenvironment, we continue to operate our business with a degree of caution. We foresee any potential impact on demand as likely to overlap with a deceleration in new deliveries, sustaining momentum with favorable conditions for high occupancy and continued rent growth into 2024."
Quarter in Detail
The average occupancy level in Prologis’ owned and managed portfolio was 98.0% in the first quarter. In the quarter under review, 49.7 million square feet of leases commenced in the company’s owned and managed portfolio, with 41.6 million square feet in the operating portfolio and 8.1 million square feet in the development portfolio. The retention level was 77.2% in the quarter.
Prologis’ share of net effective rent change was 68.8% in the January-March quarter. This marked an all-time high and was led by the United States at 78.8%. The cash rent change of 41.9% also represented an all-time high. Consequently, cash same-store NOI grew 11.4% and denoted an all-time high.
The company’s share of building acquisitions amounted to $6 million in the reported quarter. Development stabilization aggregated $770 million, while development starts totaled $57 million, with 100% being built to suit. PLD’s total dispositions and contributions were $59 million.
Liquidity
Prologis exited the first quarter of 2023 with cash and cash equivalents of $522.5 million, up from $278.5 million at the end of 2022.
Debt, as a percentage of the total market capitalization, was 19.1%. The company's weighted average interest rate on its share of the total debt was 2.6%, with a weighted average term of 9.7 years. Prologis and its co-investment ventures issued $3.6 billion of debt in the first quarter at a weighted average interest rate of 4.5%%, with a weighted average term of 13.7 years.
Per Timothy D. Arndt, the chief financial officer of Prologis, "Our liquidity position of $6.7 billion, inclusive of $1.0 billion of additional line of credit capacity closed in April, is at an all-time high, providing further flexibility to capitalize as opportunities arise."
Guidance
Prologis slightly raised its 2023 core FFO per share guidance to the range of $5.42-$5.50 from $5.40-$5.50 projected earlier, suggesting a 0.2% increase at the midpoint. The Zacks Consensus Estimate for the same is currently pegged at $5.50.
The company expects average occupancy in the band of 97.00-97.50%, up 25 basis points (bps) at the midpoint from the prior guidance. Cash same-store NOI (Prologis share) is projected at 9.00-9.75%, up 37.5 bps at the midpoint than what was guided earlier.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Prologis has an average Growth Score of C, a grade with the same score on the momentum front. 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
Prologis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Prologis (PLD) Down 2% Since Last Earnings Report?
A month has gone by since the last earnings report for Prologis (PLD - Free Report) . Shares have lost about 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 drivers.
Prologis Beats Q1 FFO Estimates on Solid Rent Growth
Prologis reported first-quarter 2023 core FFO per share of $1.22, beating the Zacks Consensus Estimate of $1.21. This also compares favorably with the year-ago quarter’s figure of $1.09.
Results reflected solid demand for industrial real estate, leading to low vacancies and an increase in rents. The industrial REIT raised the midpoint of its 2023 guidance.
Prologis generated rental revenues of $1.633 billion, which surpassed the Zacks Consensus Estimate of $1.625 billion. The figure also increased from the $1.076 billion reported in the year-ago period. Total revenues were $1.77 billion, up from the year-ago quarter’s $1.22 billion.
Per Hamid R. Moghadam, the co-founder and chief executive officer of the company, " Given the macroenvironment, we continue to operate our business with a degree of caution. We foresee any potential impact on demand as likely to overlap with a deceleration in new deliveries, sustaining momentum with favorable conditions for high occupancy and continued rent growth into 2024."
Quarter in Detail
The average occupancy level in Prologis’ owned and managed portfolio was 98.0% in the first quarter. In the quarter under review, 49.7 million square feet of leases commenced in the company’s owned and managed portfolio, with 41.6 million square feet in the operating portfolio and 8.1 million square feet in the development portfolio. The retention level was 77.2% in the quarter.
Prologis’ share of net effective rent change was 68.8% in the January-March quarter. This marked an all-time high and was led by the United States at 78.8%. The cash rent change of 41.9% also represented an all-time high. Consequently, cash same-store NOI grew 11.4% and denoted an all-time high.
The company’s share of building acquisitions amounted to $6 million in the reported quarter. Development stabilization aggregated $770 million, while development starts totaled $57 million, with 100% being built to suit. PLD’s total dispositions and contributions were $59 million.
Liquidity
Prologis exited the first quarter of 2023 with cash and cash equivalents of $522.5 million, up from $278.5 million at the end of 2022.
Debt, as a percentage of the total market capitalization, was 19.1%. The company's weighted average interest rate on its share of the total debt was 2.6%, with a weighted average term of 9.7 years. Prologis and its co-investment ventures issued $3.6 billion of debt in the first quarter at a weighted average interest rate of 4.5%%, with a weighted average term of 13.7 years.
Per Timothy D. Arndt, the chief financial officer of Prologis, "Our liquidity position of $6.7 billion, inclusive of $1.0 billion of additional line of credit capacity closed in April, is at an all-time high, providing further flexibility to capitalize as opportunities arise."
Guidance
Prologis slightly raised its 2023 core FFO per share guidance to the range of $5.42-$5.50 from $5.40-$5.50 projected earlier, suggesting a 0.2% increase at the midpoint. The Zacks Consensus Estimate for the same is currently pegged at $5.50.
The company expects average occupancy in the band of 97.00-97.50%, up 25 basis points (bps) at the midpoint from the prior guidance. Cash same-store NOI (Prologis share) is projected at 9.00-9.75%, up 37.5 bps at the midpoint than what was guided earlier.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Prologis has an average Growth Score of C, a grade with the same score on the momentum front. 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
Prologis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.