It has been about a month since the last earnings report for Prologis (PLD - Free Report) . Shares have added about 5.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Prologis due for a pullback? 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 catalysts.
Prologis' Q1 FFO & Revenues Top Estimates, View Up
Prologis reported first-quarter 2019 core FFO per share of 73 cents, beating the Zacks Consensus Estimate by a penny. However, results compare unfavorably with the year-ago figure of 80 cents. Notably, the company had net promote income of 9 cents in the year-ago period, while no promotes were earned in the just-reported quarter.
The company witnessed top-line growth in the first quarter, while period-end occupancy remained high. Moreover, this industrial REIT raised its guidance for 2019 core FFO per share by more than 2% at the mid-point.
The company generated rental revenues of $696.8 million, which surpassed the Zacks Consensus Estimate of $658.5 million. The revenue figure also compares favorably with the year-ago tally of $555.9 million.
Quarter in Detail
At the end of the reported quarter, occupancy level in the company’s owned and managed portfolio was 96.8%, flat year over year. During the quarter, 43 million square feet of leases commenced in the company’s owned and managed portfolio, up from 33 million square feet in the year-ago period.
Prologis’ share of net effective rent change was 25.1% in the Jan-Mar quarter compared with 21.9% recorded a year ago. Cash rent change was 10.8%, as against 9.2% recorded in the year-earlier quarter. Cash same-store net operating income (NOI) registered 5.5% growth compared with the 7.9% increase reported in the comparable period last year.
In first-quarter 2019, Prologis’ share of building acquisitions amounted to $179 million, with a weighted average stabilized cap rate of 4.3%. Development stabilization aggregated $691 million, while development starts totaled $239 million, with 41.2% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $157 million, with weighted average stabilized cap rate (excluding land and other real estate) of 5.9%.
Finally, the company exited the Mar-end quarter with cash and cash equivalents of $251.0 million, significantly down from $343.9 million recorded at the end of the previous year. Prologis ended the first quarter with leverage of 20.8% on a market capitalization basis and debt-to-adjusted EBITDA of 4.3x and $4.1 billion of liquidity.
Notably, during the quarter under review, the company and its co-investment ventures accomplished $5.4 billion in capital markets activity. This included the upsizing of its global line of credit to $3.5 billion. Further, the company lowered its ownership in its Prologis European Logistics Fund (PELF), which led to generation of $313 million in proceeds during the quarter. Per management, this move was in line with the company’s long-term targets for investment.
Prologis raised its core FFO per share outlook for full-year 2019. The company projects core FFO per share of $3.20-3.26, up from $3.12-$3.20 estimated earlier.
The company forecasts 2019 year-end occupancy of 96.5-97.5%, up from 96.0-97.5% guided earlier and cash Same-Store NOI (Prologis share) of 4.25-5.00% compared with the prior projection of 3.75-4.75%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Prologis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.