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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 first-quarter 2024 earnings on Apr 17 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 reported an in-line performance in terms of core funds from operations (FFO) per share. The quarterly results reflected healthy leasing activity and a rise in rental revenues. However, higher interest expenses acted as a dampener.
Over the trailing four quarters, Prologis beat the Zacks Consensus Estimate in terms of FFO per share on three occasions and met on the other, the average beat being 3.23%. This is depicted in the graph below:
Let’s see how things have shaped up before this announcement.
US Industrial Real Estate Market in Q1
Per a Cushman & Wakefield (CWK) report, following two years of remarkable growth emerging from the pandemic, the U.S. industrial real estate market continues to cool off. Though tenant demand tapered off in the first quarter, it remains positive. The overall vacancy rate is trending higher as new completions continue to surpass net absorption.
However, though demand is moderating, it is not significantly plunging. There is new supply in the market, and vacancy rates are rising but at a manageable pace. Similarly, growth in rents is decelerating but remains solidly positive, suggesting a “soft landing”.
There was healthy new leasing activity throughout the first quarter. With 128.7 million square feet (msf) of transactions completed, quarterly new leasing activity was 3% higher than the 10-year pre-pandemic average from 2010 to 2019.
While absorption slowed in the quarter but remained positive, with net absorption coming at 13.8 msf, down from 48 msf in the prior quarter and from the 77 msf recorded a year ago.
The overall vacancy rate climbed an additional 60 basis points (bps) to reach 5.8%, propelled upward for the fifth consecutive quarter by the influx of new speculative supply. Despite being elevated, vacancy remains below its historical average of 7%. There is a moderation in rent growth, and industrial rents grew 6% annually in the first quarter of 2024 compared with 10% in 2023 and 20% in 2022.
However, the future construction pipeline is rapidly diminishing, and new industrial construction starts have declined 40% year over year. In the current high interest rate environment and slowing demand for space, fewer developers are initiating projects, particularly speculative developments.
Factors to Note
Given Prologis’ capacity to offer high-quality facilities in key markets, it is positioned to effectively navigate the current softening of the industrial real estate market. With its differentiated customer offerings and strategic investments in the to-be-reported quarter, the REIT is still likely to have experienced healthy rent and occupancy levels compared to its peers.
Prologis’ expansion efforts through acquisitions and developments in recent years are likely to have boosted the top line in the to-be-reported quarter. The company’s share of building acquisitions amounted to $733 million in 2023. Development stabilization aggregated $3.15 billion, while development starts totaled $3.4 billion.
PLD is also likely to have gained from its industry-leading cost structure. Prologis has a robust balance sheet that empowers its expansion moves. As a dominant player in the industrial REIT sector, it can secure capital at advantageous rates. It is expected to have upheld financial resilience and liquidity during the period under review.
Projections for Q1 2024
The Zacks Consensus Estimate for first-quarter revenues is currently pegged at $1.81 billion, which suggests a 10.9% year-over-year jump.
We project a 10.6% increase in rental revenues in the first quarter to $1.76 million. Our estimate for first-quarter average occupancy is 97.2%, which implies a 10-basis point increase from the prior quarter. The same-store net operating income is expected to rise 8.8%.
Prologis’ activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share has been unrevised at $1.28 in the past month. Nevertheless, it suggests a 4.92% increase year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict 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 not the case here.
Prologis currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%. 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 stocks from the broader REIT sector — Welltower Inc. (WELL - Free Report) and Public Storage (PSA - Free Report) — you may want to consider as our model shows that these 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 first-quarter 2024 earnings on Apr 17 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 reported an in-line performance in terms of core funds from operations (FFO) per share. The quarterly results reflected healthy leasing activity and a rise in rental revenues. However, higher interest expenses acted as a dampener.
Over the trailing four quarters, Prologis beat the Zacks Consensus Estimate in terms of FFO per share on three occasions and met on the other, the average beat being 3.23%. This is depicted in the graph below:
Prologis, Inc. Price and EPS Surprise
Prologis, Inc. price-eps-surprise | Prologis, Inc. Quote
Let’s see how things have shaped up before this announcement.
US Industrial Real Estate Market in Q1
Per a Cushman & Wakefield (CWK) report, following two years of remarkable growth emerging from the pandemic, the U.S. industrial real estate market continues to cool off. Though tenant demand tapered off in the first quarter, it remains positive. The overall vacancy rate is trending higher as new completions continue to surpass net absorption.
However, though demand is moderating, it is not significantly plunging. There is new supply in the market, and vacancy rates are rising but at a manageable pace. Similarly, growth in rents is decelerating but remains solidly positive, suggesting a “soft landing”.
There was healthy new leasing activity throughout the first quarter. With 128.7 million square feet (msf) of transactions completed, quarterly new leasing activity was 3% higher than the 10-year pre-pandemic average from 2010 to 2019.
While absorption slowed in the quarter but remained positive, with net absorption coming at 13.8 msf, down from 48 msf in the prior quarter and from the 77 msf recorded a year ago.
The overall vacancy rate climbed an additional 60 basis points (bps) to reach 5.8%, propelled upward for the fifth consecutive quarter by the influx of new speculative supply. Despite being elevated, vacancy remains below its historical average of 7%. There is a moderation in rent growth, and industrial rents grew 6% annually in the first quarter of 2024 compared with 10% in 2023 and 20% in 2022.
However, the future construction pipeline is rapidly diminishing, and new industrial construction starts have declined 40% year over year. In the current high interest rate environment and slowing demand for space, fewer developers are initiating projects, particularly speculative developments.
Factors to Note
Given Prologis’ capacity to offer high-quality facilities in key markets, it is positioned to effectively navigate the current softening of the industrial real estate market. With its differentiated customer offerings and strategic investments in the to-be-reported quarter, the REIT is still likely to have experienced healthy rent and occupancy levels compared to its peers.
Prologis’ expansion efforts through acquisitions and developments in recent years are likely to have boosted the top line in the to-be-reported quarter. The company’s share of building acquisitions amounted to $733 million in 2023. Development stabilization aggregated $3.15 billion, while development starts totaled $3.4 billion.
PLD is also likely to have gained from its industry-leading cost structure. Prologis has a robust balance sheet that empowers its expansion moves. As a dominant player in the industrial REIT sector, it can secure capital at advantageous rates. It is expected to have upheld financial resilience and liquidity during the period under review.
Projections for Q1 2024
The Zacks Consensus Estimate for first-quarter revenues is currently pegged at $1.81 billion, which suggests a 10.9% year-over-year jump.
We project a 10.6% increase in rental revenues in the first quarter to $1.76 million. Our estimate for first-quarter average occupancy is 97.2%, which implies a 10-basis point increase from the prior quarter. The same-store net operating income is expected to rise 8.8%.
Prologis’ activities during the soon-to-be-reported quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the first-quarter FFO per share has been unrevised at $1.28 in the past month. Nevertheless, it suggests a 4.92% increase year over year.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict 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 not the case here.
Prologis currently carries a Zacks Rank of 3 and has an Earnings ESP of 0.00%. 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 stocks from the broader REIT sector — Welltower Inc. (WELL - Free Report) and Public Storage (PSA - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Welltower is slated to report quarterly numbers on Apr 29. VICI has an Earnings ESP of +1.47% and a Zacks Rank of 3 presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Public Storage is slated to report quarterly numbers on Apr 30. PSA has an Earnings ESP of +1.02% and carries 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.