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Key Factors to Impact Prologis (PLD) This Earnings Season
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Prologis (PLD - Free Report) , the leading industrial REIT, is slated to report second-quarter 2023 earnings on Jul 18 before the bell. In anticipation of the announcement, industry analysts and investors are eager to assess the company's performance and prospects in the current economic climate.
In the last reported quarter, this REIT delivered a surprise of 0.83% in terms of FFO per share. Results reflected solid demand for industrial real estate, leading to low vacancies and an increase in rents.
Over the trailing four quarters, Prologis beat the Zacks Consensus Estimate in terms of FFO per share on three occasions and missed the same on the other, the average beat being 1.50%. This is depicted in the graph below:
In late June, Prologis announced an agreement to acquire close to 14 million square feet of industrial properties from opportunistic real estate funds affiliated with Blackstone in a cash-funded transaction valued at $3.1 billion.
Let’s see how things have shaped up before this announcement.
US Industrial Real Estate Market in Q2
Per a Cushman & Wakefield (CWK - Free Report) report, following two years of exceptional demand fueling cumulative rent growth of 30% or more, the industrial real estate sector is starting to normalize. Net absorption for the second quarter measuring 44.9 million square feet (msf) marks a drop from the heights of the previous year. However, it is still in line with the healthy pre-pandemic absorption levels.
Leasing activity too mirrors this trend amid economic challenges. While the gross new leasing of 141.1 msf is down 8.9% from the first quarter, it is still in line with the quarterly average experienced from 2015 to 2019. The rise in vacant sublease space in certain markets has a moderating effect on overall absorption figures.
The second quarter saw a swift influx of new industrial supply, with a staggering 139.5 msf of new developments reaching completion. Amid this, the national vacancy rate increased by 60 basis points to 4.1%, surpassing the 4% mark for the first time since mid-2021. Despite the rise, the vacancy rate remains well below the 10-year average, suggesting a resilient market.
However, despite the softening market conditions, rents continued to rise. Second-quarter asking rental rates increased by 4.6% quarter over quarter, pushing the figure to $9.59 per square foot (psf). In many markets, the healthy delivery of Class A speculative logistics space at a premium price is exerting upward pressure on prices. However, amid the slowing demand, developers are dialing down, with the construction pipeline declining by 5.1% quarter over quarter.
Factors to Note
Given Prologis’ capacity to offer high-quality facilities in key markets, it is well-poised to capitalize on the still healthy industrial real estate sector trends. Prologis is likely to have captured favorable fundamentals with its differentiated customer offerings and strategic investments in the to-be-reported quarter.
Prologis’ expansion efforts through acquisitions and developments in recent years are likely to have boosted the top line in the to-be-reported quarter. In October 2022, Prologis closed the acquisition of Duke Realty in an all-stock transaction valued at $23 billion, thereby boosting its presence in the key markets. In addition, PLD is likely to have gained from its industry-leading cost structure.
Moreover, Prologis has decent balance sheet strength to fuel its growth endeavors. A market leader, this industrial REIT has the ability to raise capital at favorable rates. It is likely to have maintained financial strength with liquidity during the period in discussion.
Projections for Q2 2023
The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $1.66 billion, suggesting a nearly 52.2% year-over-year jump.
Our estimate for development management and other revenues is presently pegged at $4.2 million for the second quarter. Our estimate for second-quarter average occupancy is 97.5%, implying a 40-basis point decline from the prior quarter. Moreover, the same-store net operating income is expected to increase 8.9%.
Prologis’ activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has been revised a cent downward to $1.67 in the past month. However, it suggests 50.4% growth year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model predicts a surprise in terms of FFO per share for Prologis this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.
Prologis currently has a Zacks Rank of 3 and an Earnings ESP of +0.10%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two other stocks from the broader REIT sector — Crown Castle Inc. (CCI - Free Report) and SL Green Realty Corp. (SLG - Free Report) — you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Key Factors to Impact Prologis (PLD) This Earnings Season
Prologis (PLD - Free Report) , the leading industrial REIT, is slated to report second-quarter 2023 earnings on Jul 18 before the bell. In anticipation of the announcement, industry analysts and investors are eager to assess the company's performance and prospects in the current economic climate.
In the last reported quarter, this REIT delivered a surprise of 0.83% in terms of FFO per share. Results reflected solid demand for industrial real estate, leading to low vacancies and an increase in rents.
Over the trailing four quarters, Prologis beat the Zacks Consensus Estimate in terms of FFO per share on three occasions and missed the same on the other, the average beat being 1.50%. This is depicted in the graph below:
Prologis, Inc. Price and EPS Surprise
Prologis, Inc. price-eps-surprise | Prologis, Inc. Quote
In late June, Prologis announced an agreement to acquire close to 14 million square feet of industrial properties from opportunistic real estate funds affiliated with Blackstone in a cash-funded transaction valued at $3.1 billion.
Let’s see how things have shaped up before this announcement.
US Industrial Real Estate Market in Q2
Per a Cushman & Wakefield (CWK - Free Report) report, following two years of exceptional demand fueling cumulative rent growth of 30% or more, the industrial real estate sector is starting to normalize. Net absorption for the second quarter measuring 44.9 million square feet (msf) marks a drop from the heights of the previous year. However, it is still in line with the healthy pre-pandemic absorption levels.
Leasing activity too mirrors this trend amid economic challenges. While the gross new leasing of 141.1 msf is down 8.9% from the first quarter, it is still in line with the quarterly average experienced from 2015 to 2019. The rise in vacant sublease space in certain markets has a moderating effect on overall absorption figures.
The second quarter saw a swift influx of new industrial supply, with a staggering 139.5 msf of new developments reaching completion. Amid this, the national vacancy rate increased by 60 basis points to 4.1%, surpassing the 4% mark for the first time since mid-2021. Despite the rise, the vacancy rate remains well below the 10-year average, suggesting a resilient market.
However, despite the softening market conditions, rents continued to rise. Second-quarter asking rental rates increased by 4.6% quarter over quarter, pushing the figure to $9.59 per square foot (psf). In many markets, the healthy delivery of Class A speculative logistics space at a premium price is exerting upward pressure on prices. However, amid the slowing demand, developers are dialing down, with the construction pipeline declining by 5.1% quarter over quarter.
Factors to Note
Given Prologis’ capacity to offer high-quality facilities in key markets, it is well-poised to capitalize on the still healthy industrial real estate sector trends. Prologis is likely to have captured favorable fundamentals with its differentiated customer offerings and strategic investments in the to-be-reported quarter.
Prologis’ expansion efforts through acquisitions and developments in recent years are likely to have boosted the top line in the to-be-reported quarter. In October 2022, Prologis closed the acquisition of Duke Realty in an all-stock transaction valued at $23 billion, thereby boosting its presence in the key markets. In addition, PLD is likely to have gained from its industry-leading cost structure.
Moreover, Prologis has decent balance sheet strength to fuel its growth endeavors. A market leader, this industrial REIT has the ability to raise capital at favorable rates. It is likely to have maintained financial strength with liquidity during the period in discussion.
Projections for Q2 2023
The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $1.66 billion, suggesting a nearly 52.2% year-over-year jump.
Our estimate for development management and other revenues is presently pegged at $4.2 million for the second quarter. Our estimate for second-quarter average occupancy is 97.5%, implying a 40-basis point decline from the prior quarter. Moreover, the same-store net operating income is expected to increase 8.9%.
Prologis’ activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has been revised a cent downward to $1.67 in the past month. However, it suggests 50.4% growth year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model predicts a surprise in terms of FFO per share for Prologis this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.
Prologis currently has a Zacks Rank of 3 and an Earnings ESP of +0.10%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two other stocks from the broader REIT sector — Crown Castle Inc. (CCI - Free Report) and SL Green Realty Corp. (SLG - Free Report) — you may want to consider as our model shows that these also have the right combination of elements to report a surprise this quarter.
Crown Castle is slated to report quarterly numbers on Jul 19. CCI has an Earnings ESP of +1.07 % and carries a Zacks Rank of 2 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
SL Green Realty Corp. is slated to report quarterly numbers on Jul 19. SLG has an Earnings ESP of +1.41% and a Zacks Rank of 3 presently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.