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What's in the Offing for Duke Realty's (DRE) Q4 Earnings?
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Duke Realty Corp. is scheduled to report fourth-quarter and full year 2020 earnings on Jan 27, after the market closes. The company’s results are likely to reflect year-over-year growth in both its funds from operations (FFO) per share and revenues.
In the last reported quarter, this industrial real estate investment trust (REIT) posted a surprise of 2.56% in terms of FFO per share. Results reflected rent growth on new and renewal leases, higher in-service occupancy, and leasing of new developments.
Over the preceding four quarters, the company beat the Zacks Consensus Estimate on two occasions, matched one and missed the other. It has a trailing four-quarter negative surprise of 0.11%, on average. The graph below depicts this surprise history:
The industrial real estate category has been one of the most resilient ones amid the coronavirus pandemic. Rise in digital sales has triggered e-commerce leasing. Moreover, apart from e-retail, companies have been making strategic moves to boost supply-chain efficiencies, thus fueling demand for logistics infrastructure and efficient distribution networks.
Per a report from Cushman & Wakefield (CWK - Free Report) , there was a net absorption of 89.8 million square feet (msf) of space in the fourth quarter, marking the strongest single quarter ever recorded. As a result, the year-end 2020 tally reached 268.4 msf, exceeding the 240.9 msf reported at the prior-year end by 11.4%. New leasing activity was 178.8 msf in the quarter, bringing the annual tally to an all-time high of 659.1 msf. This reflects surge in digital sales, driving e-commerce leasing together with third-party logistics providers, which aided warehouses/distribution spaces.
Continued tight market conditions and solid demand supported rent growth during the December-end quarter, which increased 4.6% year on year. Particularly, asking rent of $6.76 per square foot during the quarter under review turned out to be a new record high rental rate for the U.S. industrial market.
The U.S. industrial vacancy rate came in at 5.2% during the quarter to be reported, flat quarter on quarter but up 30 basis points year on year. Although there has been a marginal increase year on year, vacancy rates have been low (at or under 3%) in the tightest markets. In addition, the current industrial construction pipeline has reached a new record high for the market to 360.7 msf.
Duke Realty’s capacity to bank on this favorable trend might have helped the company witness active leasing and healthy rent levels across a number of properties during the October-December quarter. Its diversified portfolio of roughly 159 million rentable square feet, positioned from coastal ports to thriving inland hubs, is likely to have witnessed solid demand from e-commerce and traditional distribution customers for its industrial properties.
Moreover, in December, the company raised the guidance for 2020 development starts to $775-$850 million, from the prior estimate of $650-$800 million, following significant development transactions since the beginning of the fourth quarter.
Also, with notable leasing activities, the company was able to raise its pre-leasing level of the Sep 30, 2020 under-construction pipeline to 76%, considerably up from the 63% reported at third-quarter end. Moreover, since the end of the third quarter through Dec 7, 2020, Duke Realty commenced seven development projects aggregating $405 million. These projects are 73% pre-leased in total.
Of these, two are speculative developments in the Southern California Inland Empire West and San Gabriel Valley submarkets, aggregating 649,000 square feet of space. The remaining are five build-to-suit development starts in the Southern California, Northern California, Dallas, Columbus, and Indianapolis markets, comprising 1.75 million square feet in total.
Notably, the Zacks Consensus Estimate for fourth-quarter FFO per share is pegged at 41 cents, suggesting a year-over-year improvement of 7.9%. The consensus estimate for quarterly revenues of $241.1 million indicates growth of 10.9% year on year.
Nonetheless, with the asset category being an attractive one amid the ongoing challenging times, there is a development boom in some markets. This high supply is likely to have intensified competition and curbed pricing power during the December-end quarter. As such, the Zacks Consensus Estimate of FFO per share for the fourth quarter remained unchanged over the past 30 days.
For the full year, the Zacks Consensus Estimate for FFO per share remained unchanged at $1.52 over the past month. Nevertheless, the figure indicates a 5.56% increase year over year on revenues of $923.2 million.
What Our Quantitative Model Unveils:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Duke Realty this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Duke Realty currently has a Zacks Rank #3 and an Earnings ESP of 0.00%.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Stag Industrial, Inc. (STAG - Free Report) , scheduled to report quarterly numbers on Feb 10, currently has an Earnings ESP of +2.13% and a Zacks Rank of 2.
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.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
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Image: Bigstock
What's in the Offing for Duke Realty's (DRE) Q4 Earnings?
Duke Realty Corp. is scheduled to report fourth-quarter and full year 2020 earnings on Jan 27, after the market closes. The company’s results are likely to reflect year-over-year growth in both its funds from operations (FFO) per share and revenues.
In the last reported quarter, this industrial real estate investment trust (REIT) posted a surprise of 2.56% in terms of FFO per share. Results reflected rent growth on new and renewal leases, higher in-service occupancy, and leasing of new developments.
Over the preceding four quarters, the company beat the Zacks Consensus Estimate on two occasions, matched one and missed the other. It has a trailing four-quarter negative surprise of 0.11%, on average. The graph below depicts this surprise history:
Duke Realty Corporation Price and EPS Surprise
Duke Realty Corporation price-eps-surprise | Duke Realty Corporation Quote
Factors to Note
The industrial real estate category has been one of the most resilient ones amid the coronavirus pandemic. Rise in digital sales has triggered e-commerce leasing. Moreover, apart from e-retail, companies have been making strategic moves to boost supply-chain efficiencies, thus fueling demand for logistics infrastructure and efficient distribution networks.
Per a report from Cushman & Wakefield (CWK - Free Report) , there was a net absorption of 89.8 million square feet (msf) of space in the fourth quarter, marking the strongest single quarter ever recorded. As a result, the year-end 2020 tally reached 268.4 msf, exceeding the 240.9 msf reported at the prior-year end by 11.4%. New leasing activity was 178.8 msf in the quarter, bringing the annual tally to an all-time high of 659.1 msf. This reflects surge in digital sales, driving e-commerce leasing together with third-party logistics providers, which aided warehouses/distribution spaces.
Continued tight market conditions and solid demand supported rent growth during the December-end quarter, which increased 4.6% year on year. Particularly, asking rent of $6.76 per square foot during the quarter under review turned out to be a new record high rental rate for the U.S. industrial market.
The U.S. industrial vacancy rate came in at 5.2% during the quarter to be reported, flat quarter on quarter but up 30 basis points year on year. Although there has been a marginal increase year on year, vacancy rates have been low (at or under 3%) in the tightest markets. In addition, the current industrial construction pipeline has reached a new record high for the market to 360.7 msf.
Duke Realty’s capacity to bank on this favorable trend might have helped the company witness active leasing and healthy rent levels across a number of properties during the October-December quarter. Its diversified portfolio of roughly 159 million rentable square feet, positioned from coastal ports to thriving inland hubs, is likely to have witnessed solid demand from e-commerce and traditional distribution customers for its industrial properties.
Moreover, in December, the company raised the guidance for 2020 development starts to $775-$850 million, from the prior estimate of $650-$800 million, following significant development transactions since the beginning of the fourth quarter.
Also, with notable leasing activities, the company was able to raise its pre-leasing level of the Sep 30, 2020 under-construction pipeline to 76%, considerably up from the 63% reported at third-quarter end. Moreover, since the end of the third quarter through Dec 7, 2020, Duke Realty commenced seven development projects aggregating $405 million. These projects are 73% pre-leased in total.
Of these, two are speculative developments in the Southern California Inland Empire West and San Gabriel Valley submarkets, aggregating 649,000 square feet of space. The remaining are five build-to-suit development starts in the Southern California, Northern California, Dallas, Columbus, and Indianapolis markets, comprising 1.75 million square feet in total.
Notably, the Zacks Consensus Estimate for fourth-quarter FFO per share is pegged at 41 cents, suggesting a year-over-year improvement of 7.9%. The consensus estimate for quarterly revenues of $241.1 million indicates growth of 10.9% year on year.
Nonetheless, with the asset category being an attractive one amid the ongoing challenging times, there is a development boom in some markets. This high supply is likely to have intensified competition and curbed pricing power during the December-end quarter. As such, the Zacks Consensus Estimate of FFO per share for the fourth quarter remained unchanged over the past 30 days.
For the full year, the Zacks Consensus Estimate for FFO per share remained unchanged at $1.52 over the past month. Nevertheless, the figure indicates a 5.56% increase year over year on revenues of $923.2 million.
What Our Quantitative Model Unveils:
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for Duke Realty this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Duke Realty currently has a Zacks Rank #3 and an Earnings ESP of 0.00%.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Rexford Industrial Realty, Inc. (REXR - Free Report) , slated to release fourth-quarter earnings on Feb 10, has an Earnings ESP of +2.13% and a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stag Industrial, Inc. (STAG - Free Report) , scheduled to report quarterly numbers on Feb 10, currently has an Earnings ESP of +2.13% and a Zacks Rank of 2.
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.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>