Key Highlights:
- Q3 core FFO per share stands at $1.30, surpassing the average analyst estimate of $1.25.
- Total revenue for the quarter rose to $1.92B from $1.16B a year ago.
- Prologis boosts its 2023 core FFO guidance range and increases its forecast for development starts and acquisitions.
San Francisco-based Prologis, Inc. (NYSE: PLD), a leading industrial real estate investment trust (REIT), announced its Q3 earnings on Tuesday, revealing figures that exceeded market expectations. The results show an optimistic forecast for the upcoming year despite the challenges posed by the current economic landscape.
For Q3, Prologis reported a core funds from operations (FFO) per share of $1.30, outpacing the average analyst estimate of $1.25. However, this is a drop from $1.83 in Q2 and $1.73 in the same quarter the previous year. Despite the sequential decrease, the company’s total revenue displayed a robust rise, reaching $1.92B, a significant increase from the $1.16B reported a year earlier.
Given the upbeat results and future projections, the company has chosen to adjust its 2023 core FFO guidance range, now forecasting a per-share rate of $5.58-$5.60, a slight increase from the previously stated range of $5.56-$5.60. This update aligns closely with the market consensus of $5.59 per share.
Delving deeper into the financials, the firm’s adjusted EBITDA stood at $1.62B, marking a minor increase from the $1.61B in Q3 2022 but a decrease from the $2.28B reported in the previous quarter. Furthermore, Prologis revealed that its average occupancy during the quarter was 97.1 percent, slightly down from 97.5 percent in Q2.
Additionally, the company anticipates a cash same-store operating income increase of 9.75 percent to 10.00 percent for the year, compared to the earlier range of 9.50 percent to 10.00 percent. A notable shift in the firm’s outlook is evident in its projected expenditure on development starts and acquisitions. Prologis now estimates spending between $3.0B-$3.5B on development starts, up from its earlier projection of $2.5B-$3.0B. The company has also revised its acquisition spending outlook to be between $500M-$800M, an increase from the previous range of $300M-$600M. Conversely, expected dispositions have been lowered to a range of $500M-$1.00B from the earlier estimate of $800M-$1.20B.
Reflecting on the results and offering a broader perspective on the economic environment, CEO Hamid R. Moghadam commented, “Until there is more stability in the economy, negative customer sentiment will weigh on demand.” He emphasized the company’s ongoing strategy, “We remain focused on capturing our embedded lease mark-to-market, building out our land bank into a favorable future supply environment, and partnering with our customers to address their most critical pain points.”
While Prologis’ stock edged up by 0.1 percent in premarket trading following the announcement, it has witnessed a decline of 13.3 percent over the past three months. In comparison, the Real Estate Select Sector SPDR ETF (XLRE) has shrunk by 9.8 percent, and the broader S&P 500 index has retracted by 3.3 percent.
The overall results depict a company that, while cognizant of the broader economic challenges, remains confident in its strategies and growth potential in the logistics real estate sector.
