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Why Is Prologis (PLD) Up 3.4% 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 added about 3.4% 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' Q2 FFO & Revenues Top Estimates, View Up
Prologis reported second-quarter 2020 core FFO per share of $1.11, beating the Zacks Consensus Estimate of 99 cents. Results also compared favorably with the year-ago figure of 77 cents.
This better-than-expected performance was driven by decent growth in rental income. Occupancy level was healthy. The company also reported 23 cents of net promote income in the quarter as against no such income in the prior-year period.
Prologis generated rental revenues of $944.4 million, which registered 34.8% growth from the prior-year quarter. The figure also surpassed the Zacks Consensus Estimate of $927.3 million. The company also revised its full-year core FFO per share guidance northward compared with the one issued in April.
According to Hamid R. Moghadam, chairman and CEO of the company, "While e-commerce is clearly a tailwind, demand is broad-based across a variety of categories — a trend we saw accelerate in June."
The company’s chief financial officer also noted that though the economic impact of COVID-19 remains unknown, its proprietary data, pace of rent collections, as well as dialogue with customers gives “a more positive outlook for the back half of the year”.
Quarter in Detail
At the end of the reported quarter, occupancy level in the company’s owned-and-managed portfolio was 95.7%. During the second quarter, 42 million square feet of leases commenced in the company’s owned-and-managed portfolio, with 39 million square feet being in the operating portfolio and roughly 3 million square feet in the development portfolio. Retention level was 80.9% in the quarter, denoting an expansion of 540 basis points from the prior quarter.
Prologis’ share of net effective rent change was 22% during the April-June quarter, driven by the United States at 27.7%. Cash rent change was 9.6%, while cash same-store net operating income (NOI) registered 2.9% growth.
Amid the macroeconomic uncertainty, Prologis’ share of building acquisitions amounted to $8 million, with a weighted average stabilized cap rate of 7.6% during the quarter. Development stabilization aggregated $333 million, while development starts totaled $66 million, with 100% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $304 million, with weighted average stabilized cap rate (excluding land and other real estate) of 6%.
Liquidity
The company exited the June-end quarter with cash and cash equivalents of $549.1 million, down from the $807.9 million recorded at the end of first-quarter 2020. However, combined with availability from other lines, Prologis ended the quarter with $4.6 billion in liquidity. Debt, as a percentage of total market capitalization, was 20% at quarter end.
The combined investment capacity of Prologis and its open-ended vehicles, at levels in line with their current credit ratings, is well above $13 billion. Prologis and its co-investment ventures accomplished $1.6 billion of debt activity during the quarter, at a weighted average rate of 1.8% and a weighted average term of nearly 13 years. Moreover, at quarter end, the company's weighted average rate on its share of total debt was 2.3%, with a weighted average remaining term of 9.1 years.
Outlook
Prologis projects 2020 core FFO per share at $3.70-$3.75 compared with the prior guidance of $3.55-$3.65.
It forecasts year-end occupancy of 95-96% compared with the 94.5-96% guided earlier. Cash same-store NOI (Prologis share) is projected in the range of 2.5-3.5% compared with the 1.75-3.25% expected earlier.
Moreover, the company projects $500-$600 million of building acquisitions compared with the $450 million projected earlier, while development starts are expected to be $800-$1,200 million as against the prior estimate of $500-$800 million for this year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, 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
Estimates have been broadly 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.
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Why Is Prologis (PLD) Up 3.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Prologis (PLD - Free Report) . Shares have added about 3.4% 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' Q2 FFO & Revenues Top Estimates, View Up
Prologis reported second-quarter 2020 core FFO per share of $1.11, beating the Zacks Consensus Estimate of 99 cents. Results also compared favorably with the year-ago figure of 77 cents.
This better-than-expected performance was driven by decent growth in rental income. Occupancy level was healthy. The company also reported 23 cents of net promote income in the quarter as against no such income in the prior-year period.
Prologis generated rental revenues of $944.4 million, which registered 34.8% growth from the prior-year quarter. The figure also surpassed the Zacks Consensus Estimate of $927.3 million. The company also revised its full-year core FFO per share guidance northward compared with the one issued in April.
According to Hamid R. Moghadam, chairman and CEO of the company, "While e-commerce is clearly a tailwind, demand is broad-based across a variety of categories — a trend we saw accelerate in June."
The company’s chief financial officer also noted that though the economic impact of COVID-19 remains unknown, its proprietary data, pace of rent collections, as well as dialogue with customers gives “a more positive outlook for the back half of the year”.
Quarter in Detail
At the end of the reported quarter, occupancy level in the company’s owned-and-managed portfolio was 95.7%. During the second quarter, 42 million square feet of leases commenced in the company’s owned-and-managed portfolio, with 39 million square feet being in the operating portfolio and roughly 3 million square feet in the development portfolio. Retention level was 80.9% in the quarter, denoting an expansion of 540 basis points from the prior quarter.
Prologis’ share of net effective rent change was 22% during the April-June quarter, driven by the United States at 27.7%. Cash rent change was 9.6%, while cash same-store net operating income (NOI) registered 2.9% growth.
Amid the macroeconomic uncertainty, Prologis’ share of building acquisitions amounted to $8 million, with a weighted average stabilized cap rate of 7.6% during the quarter. Development stabilization aggregated $333 million, while development starts totaled $66 million, with 100% being build-to-suit. Furthermore, the company’s total dispositions and contributions came in at $304 million, with weighted average stabilized cap rate (excluding land and other real estate) of 6%.
Liquidity
The company exited the June-end quarter with cash and cash equivalents of $549.1 million, down from the $807.9 million recorded at the end of first-quarter 2020. However, combined with availability from other lines, Prologis ended the quarter with $4.6 billion in liquidity. Debt, as a percentage of total market capitalization, was 20% at quarter end.
The combined investment capacity of Prologis and its open-ended vehicles, at levels in line with their current credit ratings, is well above $13 billion. Prologis and its co-investment ventures accomplished $1.6 billion of debt activity during the quarter, at a weighted average rate of 1.8% and a weighted average term of nearly 13 years. Moreover, at quarter end, the company's weighted average rate on its share of total debt was 2.3%, with a weighted average remaining term of 9.1 years.
Outlook
Prologis projects 2020 core FFO per share at $3.70-$3.75 compared with the prior guidance of $3.55-$3.65.
It forecasts year-end occupancy of 95-96% compared with the 94.5-96% guided earlier. Cash same-store NOI (Prologis share) is projected in the range of 2.5-3.5% compared with the 1.75-3.25% expected earlier.
Moreover, the company projects $500-$600 million of building acquisitions compared with the $450 million projected earlier, while development starts are expected to be $800-$1,200 million as against the prior estimate of $500-$800 million for this year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, 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
Estimates have been broadly 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.