Here's Why Should You Add Prologis Stock To Your Portfolio Now
Zacks Investment Research | Mar 05, 2020 10:26PM ET
The rising e-commerce market has brought the industrial real estate category into limelight, and Prologis, Inc. (NYSE:PLD) is expected to play a vital role in revolutionizing the way how consumers shop and receive their goods. Services like same-day delivery have been gaining traction, and last-mile properties in high-income urban areas are witnessing solid pricing, occupancy and growth in rentals.
Companies are making efforts to improve supply-chain efficiencies, spurring demand for logistics infrastructure and enabling industrial landlords like Prologis Inc. (PLD), Duke Realty Corp. (NYSE:DRE) , PS Business Parks, Inc. (NYSE:PSB) and Terreno Realty Corporation (NYSE:TRNO) , to enjoy a favorable market environment.
Particularly, Prologis is well positioned to grow supported by its solid balance sheet and sound financial management. The company is also looking to grow inorganically through accretive acquisitions and developments.
Also, shares of Prologis have outperformed the .
Here’s What Might Drive the Stock Higher
Rental Growth: Prologis is witnessing solid demand for its industrial real estates as reflected by the rent and occupancy level of the company’s properties. At the end of fourth-quarter 2019, occupancy level in the company’s owned-and-managed portfolio was 96.5%. Moreover, the company’s share of net effective rent change was 29.5% during the October-December period compared with the prior-year quarter’s 25.6%. This was aided by the United States at 34.1%. Moreover, its high number of build-to-suit development projects highlights the advantageous location of the company’s land bank.
Acquisitions: With healthy operating fundamentals in the industrial real estate markets, Prologis is actively capitalizing on growth opportunities through acquisitions apart from developments. This February, the company accomplished the $13-billion acquisition of Liberty Property Trust. The acquisition will strengthen Prologis’ presence in target regions, such as Chicago, Lehigh Valley, New Jersey, Houston, Central PA, and Southern (NYSE:SO) California. Moreover, in January, the company completed its acquisition of warehouse owner Industrial Property Trust Inc. in an all-cash deal valued at about $4 billion, including debt, from Black Creek Group. This acquisition has expanded the company’s position in key markets, like Southern California, the San Francisco Bay Area, Chicago, Atlanta, Dallas, Seattle and New Jersey.
Get The News You Want
Strong Balance Sheet and Dividend Hike: Prologis is focused on bolstering its liquidity. The company ended the December-end quarter with leverage of 18.3% on a market capitalization basis and debt-to-adjusted EBITDA of 4x as well as $4.8 billion of liquidity. Being a market leader, Prologis has the ability to raise capital at favorable rates. Further, solid dividend payouts are arguably the biggest enticement for REIT shareholders and Prologis remains committed to that. This February, the company’s board increased its annualized dividend rate by 9.4% to $2.32 from the $2.12 paid earlier. The increased dividend for the quarter of 58 cents will be paid on Mar 31, to shareholders of record on Mar 16, 2020.
Superior Return on Equity (ROE): Prologis’ ROE of 6.09% compares favorably with that of the industry average of 4.47%. This highlights that the company reinvests more efficiently compared with the industry.
Estimate Revision Trends: In addition, the trend in estimate revisions of 2020 and 2021 funds from operations (FFO) per share indicates an upbeat outlook for the company. The Zacks Consensus Estimate for 2020 and 2021 FFO per share have been revised upward 1.36% and 0.77%, respectively, in one month’s time. Therefore, given the improvement on fundamentals and positive estimate revisions, there is decent upside potential to the stock.
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.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft (NASDAQ:MSFT) in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.