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Prologis (PLD) Up 9.6% Since Last Earnings Report: Can It Continue?

·4 min read

It has been about a month since the last earnings report for Prologis (PLD). Shares have added about 9.6% 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 its most recent earnings report in order to get a better handle on the important drivers.

Prologis’ Q2 FFO & Revenues Grow Y/Y, 2022 View Up

Prologis reported second-quarter 2022 core FFO per share of $1.11, up 10% from the year-ago quarter’s figure of 1.01 cents.

Rental revenues of $1.09 billion were up from the prior-year quarter’s $1.01 billion. Total revenues came in at $1.25 billion, up from the year-ago quarter’s $1.15 billion.

Results reflect improvement in average occupancy and rent growth.

However, Prologis narrowly missed the Zacks Consensus Estimate for core FFO per share of $1.12. The consensus mark for revenues was pegged at $1.10 billion.

This industrial REIT issued an upbeat 2022 guidance.

Per Hamid R. Moghadam, co-founder and chief executive officer of the company, "As conditions normalize, we are still seeing healthy demand that rivals past peak cycles and, informed by our proprietary data insights, we expect strong demand for our properties to continue."

Quarter in Detail

The average occupancy level in Prologis’ owned and managed portfolio was 97.6% in the second quarter.

In the quarter under review, 51.3 million square feet of leases commenced in the company’s owned and managed portfolio, with 43.6 million square feet in the operating portfolio and 7.7 million square feet in the development portfolio. The retention level was 78.6% in the quarter, up from 75.4% reported at the end of the prior quarter.

Prologis’ share of net effective rent change was 45.6% in the April-June quarter, which was led by the United States at 54.0%. Cash rent change was 27.5%, while cash same-store NOI grew 8.2%, which was also led by the United States at 9.0%.

The company’s share of building acquisitions amounted to $846 million, with a weighted average stabilized cap rate (excluding other real estate) of 3.9% in the reported quarter. Development stabilization aggregated $817 million, while development starts totaled $1.67 billion, with 25.6% being built to suit. Prologis’ total dispositions and contributions were $218 million, with a weighted average stabilized cap rate (excluding land and other real estate) of 3.2%.

Liquidity

Prologis exited the second quarter of 2022 with cash and cash equivalents of $437.5 million, down from $1.9 billion at the end of the first quarter. Its liquidity amounted to $5.2 billion in cash and availability on its credit facilities.

As of Jun 30, 2022, debt, as a percentage of the total market capitalization, was 18.5%. The company's weighted average interest rate on its share of the total debt was 1.8%, with a weighted average term of 9.7 years. The company and its co-investment ventures issued $5.1 billion of debt in the second quarter at a weighted average interest rate of 1.4%.

Raised 2022 Guidance

Prologis raised its 2022 core FFO per share guidance to the range of $5.14 to $5.18 from the $5.10-$5.16 band guided earlier, indicating a 5.6% increase at the midpoint.

The company expects average occupancy in the band of 97.25-97.75%, up 38 basis points at the midpoint. Cash same-store NOI (Prologis share) is projected at 8.25-8.75% compared with the 7.25-8.00% band guided earlier.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Prologis has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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


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