ProLogis (PLD), one of the leading global providers of distribution facilities,reported fiscal 2011 first quarter recurring funds from operations (FFO) of 13 cents per share, which missed the Zacks Consensus Estimate by 2 cents. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
We cover below the results of the recent earnings announcement, as well as the subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.
Earnings Report Review
Total revenues during the reported quarter were $238.8 million compared to $217.3 million in the year-ago quarter. Total reported revenues were well ahead of the Zacks Consensus Estimate of $220 million.
ProLogis’ industrial operating portfolio (which includes completed developments) leased at quarter-end decreased to 90.7% from 91.0% in fourth quarter 2010, primarily due to a fall in leasing activities. However, total operating portfolio leased during the quarter increased 147 bps compared to the first quarter of 2010. During the reported quarter, the company leased a total of 21.9 million square feet of space across the globe.
(Read our full coverage on this earnings report: ProLogis Misses by a Whisker)
Earnings Estimate Revisions – Overview
Fiscal earnings estimates have dipped for ProLogis since the earnings release, meaning that analysts are bearish about the long-term performance of the company. Let’s dig into the earnings estimate details.
Agreement of Estimate Revisions
In the last 7 days, fiscal 2011 earnings estimates were lowered by 2 analysts out of 11 covering the stock, while none have raised the same. For fiscal 2012, 1 out of 13 analysts covering the stock has revised his estimates upward, while 1 has lowered it. This indicates that the analysts are circumspect about the long-term fiscal year earnings, although on a short-term basis, fiscal earnings are skewed in the negative direction.
Magnitude of Estimate Revisions
Earnings estimates for fiscal 2011 have remained static in the last 7 days at 64 cents. For full year 2011, ProLogis has reiterated its previous FFO guidance (excluding significant non-cash items) in the range of 62 cents to 66 cents per share.For fiscal 2012, earnings estimates have also remained steady at 73 cents, which indicates that while fundamentals are gradually improving, they were still impacted by the challenging broader economic trends.
The long-term earnings estimate picture for ProLogis is neutral. Management further observed that although the quarterly results were in line with the company’s expectations and signified a gradual improvement in market fundamentals, macroeconomic issues contributed to a slower pace of recovery as the industry was affected by the continued concerns about sovereign debt issues, rising energy costs, global military actions and the devastation and loss caused by the earthquake and tsunami in Japan. However, strong underlying requirements for high-quality distribution space enabled the company to remain upbeat about its performance in the coming quarters.
ProLogis is a leading global provider of industrial distribution facilities with operations in Europe, Asia, and North America. The company integrates international scope and expertise with a strong local presence in markets to ensure accurate and seamless flow of goods to appointed destinations. ProLogis’ distribution facilities function as processing centers for goods for its customers, enabling them to store adequate inventory to meet increased demand and mitigate risks from the impact of a break in the supply chain.
Currently, we maintain our long-term ‘Neutral’ rating on ProLogis, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold’ recommendation and indicates that the stock is expected to perform in line with the overall U.S.equity market for the next 1-3 months. We also have a ‘Neutral’ rating and a Zacks #3 Rank for First Industrial Realty Trust Inc. (FR), a competitor of ProLogis.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/