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Duke Realty (DRE) Beats Q3 FFO Estimates, Hikes Dividend
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Duke Realty Corporation’s third-quarter 2018 core funds from operations (FFO) per share of 35 cents exceeded the Zacks Consensus Estimate by a penny. Moreover, the figure came in a nickel ahead of the year-ago tally of 30 cents.
Results indicate overall improved operations, as well as increased investments in new industrial properties. The company has increased and narrowed its guidance for core FFO per share guidance. It has also announced a 7.5% hike in its quarterly dividend, backed by expectations of continued earnings growth.
Rental and related revenues of $196.9 million in the reported quarter jumped 16.1% on a year-over-year basis. However, the figure marginally missed the Zacks Consensus Estimate of $197.8 million.
Quarter in Detail
Duke Realty leased around 5.2 million square feet of space in the Sep-end quarter. Its tenant retention for the quarter was 82.7%. Moreover, the company registered same-property net operating income growth of 6.3% year over year. In fact, Duke Realty reported overall cash and annualized net effective rent growth related to new and renewal leases of 11.2% and 27.9%, respectively.
As of Sep 30, 2018, the company’s total occupancy, including properties under development, was 93.7%, down 30 basis points (bps) from the prior-quarter end. In-service occupancy, as of the same date, was 96.8%, down 60 bps from the prior-quarter figure.
Notably, during the reported quarter, the company initiated six new development projects with expected costs of $141 million, aggregating 2 million square feet of space, which were 51% pre-leased. As of Sep 30, 2018, the company’s development pipeline was 52% leased and comprised 25 properties, totaling 10.6 million square feet, with projected costs of $854 million.
Duke Realty exited the third quarter with $133.4 million of cash and cash equivalents, significantly up from $67.6 million as of Dec 31, 2017. The company does not have any significant debt maturities until 2021.
2018 Guidance
Duke Realty raised its 2018 guidance for core FFO per share to $1.31-$1.35 from $1.29-$1.35. The Zacks Consensus Estimate for the same is currently pegged at $1.33.
Management noted that leasing and rental growth performances continue to come toward the higher end of estimates. As such, the company has raised its guidance for same-property net operating income growth to 4.2-4.8% from the previous range of 3.5-4.5%.
Dividend Update
Concurrent with its earnings release, Duke Realty announced a quarterly cash dividend on common stock of 21.50 cents per share, denoting an increase of 7.5% from the prior dividend of 20 cents. The third-quarter dividend will be paid on Nov 30, to shareholders of record as of Nov 15, 2018.
Our Viewpoint
We are encouraged with the improved performance of Duke Realty in the Jul-Sep period. Notably, the industrial real estate market is currently enjoying elevated demand for logistics infrastructure amid improving economy and e-commerce boom. Given Duke Realty’s solid capacity, the company remains well poised to capitalize on this trend. Nonetheless, with rising supply of industrial real estate space, there is lesser scope for robust rent and occupancy growth in the near term. Further, rate hike remains a drag.
We now look forward to the earnings releases of other REITs like UDR Inc. (UDR - Free Report) , Vornado Realty Trust (VNO - Free Report) and AvalonBay Communities, Inc. (AVB - Free Report) which are slated to report their quarterly numbers on Oct 29.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Duke Realty (DRE) Beats Q3 FFO Estimates, Hikes Dividend
Duke Realty Corporation’s third-quarter 2018 core funds from operations (FFO) per share of 35 cents exceeded the Zacks Consensus Estimate by a penny. Moreover, the figure came in a nickel ahead of the year-ago tally of 30 cents.
Results indicate overall improved operations, as well as increased investments in new industrial properties. The company has increased and narrowed its guidance for core FFO per share guidance. It has also announced a 7.5% hike in its quarterly dividend, backed by expectations of continued earnings growth.
Rental and related revenues of $196.9 million in the reported quarter jumped 16.1% on a year-over-year basis. However, the figure marginally missed the Zacks Consensus Estimate of $197.8 million.
Quarter in Detail
Duke Realty leased around 5.2 million square feet of space in the Sep-end quarter. Its tenant retention for the quarter was 82.7%. Moreover, the company registered same-property net operating income growth of 6.3% year over year. In fact, Duke Realty reported overall cash and annualized net effective rent growth related to new and renewal leases of 11.2% and 27.9%, respectively.
As of Sep 30, 2018, the company’s total occupancy, including properties under development, was 93.7%, down 30 basis points (bps) from the prior-quarter end. In-service occupancy, as of the same date, was 96.8%, down 60 bps from the prior-quarter figure.
Notably, during the reported quarter, the company initiated six new development projects with expected costs of $141 million, aggregating 2 million square feet of space, which were 51% pre-leased. As of Sep 30, 2018, the company’s development pipeline was 52% leased and comprised 25 properties, totaling 10.6 million square feet, with projected costs of $854 million.
Duke Realty exited the third quarter with $133.4 million of cash and cash equivalents, significantly up from $67.6 million as of Dec 31, 2017. The company does not have any significant debt maturities until 2021.
2018 Guidance
Duke Realty raised its 2018 guidance for core FFO per share to $1.31-$1.35 from $1.29-$1.35. The Zacks Consensus Estimate for the same is currently pegged at $1.33.
Management noted that leasing and rental growth performances continue to come toward the higher end of estimates. As such, the company has raised its guidance for same-property net operating income growth to 4.2-4.8% from the previous range of 3.5-4.5%.
Dividend Update
Concurrent with its earnings release, Duke Realty announced a quarterly cash dividend on common stock of 21.50 cents per share, denoting an increase of 7.5% from the prior dividend of 20 cents. The third-quarter dividend will be paid on Nov 30, to shareholders of record as of Nov 15, 2018.
Our Viewpoint
We are encouraged with the improved performance of Duke Realty in the Jul-Sep period. Notably, the industrial real estate market is currently enjoying elevated demand for logistics infrastructure amid improving economy and e-commerce boom. Given Duke Realty’s solid capacity, the company remains well poised to capitalize on this trend. Nonetheless, with rising supply of industrial real estate space, there is lesser scope for robust rent and occupancy growth in the near term. Further, rate hike remains a drag.
Currently, Duke Realty has a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Duke Realty Corporation Price, Consensus and EPS Surprise
Duke Realty Corporation Price, Consensus and EPS Surprise | Duke Realty Corporation Quote
We now look forward to the earnings releases of other REITs like UDR Inc. (UDR - Free Report) , Vornado Realty Trust (VNO - Free Report) and AvalonBay Communities, Inc. (AVB - Free Report) which are slated to report their quarterly numbers on Oct 29.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>