Can Prologis (PLD) Pull a Surprise This Earnings Season?

Prologis, Inc. PLD is slated to report first-quarter 2018 earnings on Apr 17, before the opening bell.

Last quarter, this industrial real estate investment trust (REIT) reported a better-than-expected result in terms of funds from operations (FFO) per share. Net effective rent change improved in the quarter, while period-end occupancy remained at a record high.

Over the preceding four quarters, Prologis surpassed the FFO per share estimates in three occasions and met in the other. This resulted in an average positive surprise of 2.71%. This is depicted in the graph below:
 

Prologis, Inc. Price and EPS Surprise
 

Prologis, Inc. Price and EPS Surprise | Prologis, Inc. Quote

The Zacks Consensus Estimate for the first-quarter FFO per share is currently pegged at 74 cents.

Let’s see how things are shaping up for this announcement.

Factors at Play

The industrial real estate market is firing on all cylinders, backed by a recovering economy and job-market improvements, strengthening e-commerce market and healthy manufacturing environment.

Given Prologis’s capacity to offer modern distribution facilities at strategic in-fill locations, the company remains well positioned to capitalize on these growth opportunities. The company also has solid balance-sheet strength.

Prologis enjoys high number of build-to-suit development projects, which reflects the advantageous location of the company’s rich land bank, as well as the sturdy network of multi-site customers which are increasingly focusing on e-commerce. Amid elevated demand, the company is expected to enjoy high occupancy level of its properties.

As such, the stock has seen the Zacks Consensus Estimate of FFO per share for the to-be-reported quarter being revised 7.2% upward to 74 cents over the past three months. The figure denotes a projected year-over-year increase of 17.5%.

Nevertheless, recovery in the industrial market has continued for long. Also, there is intense competition in the market. Amid these, the Zacks Consensus Estimate for the first-quarter rental revenues is currently pegged at $551 million, indicating flat projection sequentially.

In the past three months, Prologis has outperformed the industry it belongs to. The company’s shares have dipped 0.3%, while the industry incurred loss of 4.5% during this time frame.

Here is what our quantitative model predicts:

Prologis has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Zacks ESP: The Earnings ESP for Prologis is +0.79%.

Zacks Rank: Prologis carries a Zacks Rank #3.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat in terms of FFO per share. This, when combined with a favorable Zacks rank, makes us reasonably confident of a positive surprise.

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:

SL Green Realty Corporation SLG, slated to release first-quarter results on Apr 18, has an Earnings ESP of +0.18% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PS Business Parks, Inc. PSB, scheduled to release earnings on Apr 24, has an Earnings ESP of +0.67% and a Zacks Rank #3.

Simon Property Group, Inc. SPG, slated to release quarterly numbers on Apr 27, has an Earnings ESP of +0.63% and a Zacks Rank #3.

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.

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Simon Property Group, Inc. (SPG) : Free Stock Analysis Report
 
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