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Prologis (PLD) Down 1.7% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Prologis, Inc. (PLD - Free Report) . Shares have lost about 1.7% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is PLD 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 Q1 FFO Beats on Higher Rent, Raises Guidance

Prologis reported first-quarter 2018 core FFO per share of 80 cents, beating the Zacks Consensus Estimate of 74 cents. Results also compared favorably with the year-ago figure of 63 cents. The company experienced solid operating results and higher net promote income.

Net effective rent change improved in the quarter, while period-end occupancy remained high. This industrial REIT also raised its guidance for 2018 core FFO per share and same-store NOI.

The company generated rental and other revenues of $560.7 million, which outpaced the Zacks Consensus Estimate of $547.4 million. The company had reported $572.1 million in the prior-year quarter.

Quarter in Detail

At the end of the reported quarter, occupancy level in the company’s owned and managed portfolio was 96.8%, expanding 20 basis points (bps) year over year.

During the quarter under review, Prologis signed 33 million square feet of leases in its owned and managed portfolio compared with 46 million square feet recorded in the year-ago period.

Prologis’ share of net effective rent change was 21.9% in the reported quarter compared with 18.5% recorded a year ago. The figure was led by the U.S. portfolio, which recorded impressive growth of 32.2%. Cash rent change was 9.2%, as against 7.7% recorded in the year-earlier quarter.

Cash same-store NOI registered 7.9% growth compared with 6.3% increase reported in the comparable period last year. This was led by 9.1% growth reported in the U.S. portfolio.

In first-quarter 2018, Prologis’ share of building acquisitions amounted to $3 million with a weighted average stabilized cap rate of 6.1%. Development stabilization aggregated $440 million, while development starts totaled $409 million, with 63.4% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $642 million, with weighted average stabilized cap rate of 5.2%.

Liquidity

Finally, the company exited the first quarter with cash and cash equivalents of $458.1 million, up from $447.0 million recorded at the end of the prior quarter. It had more than $3.6 billion of liquidity. Additionally, the company remains focused on lowering its weighted average cost of debt that came in at 2.8%.

Outlook

Prologis raised its guidance for 2018 core FFO per share and cash same-store NOI. The company now projects core FFO per share in the range of $2.95-$3.01 compared with the prior guidance of $2.85-$2.95. This denotes an increase of 8 cents per share at the mid-point.

Moreover, cash same-store NOI (Prologis share) is projected at 5.5-6.5%, marginally up from the 5.0-6.0% estimated earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter

Prologis, Inc. Price and Consensus

 

Prologis, Inc. Price and Consensus | Prologis, Inc. Quote

VGM Scores

At this time, PLD has a subpar Growth Score of D. Its Momentum is doing a lot better with an A. 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.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise PLD has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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