Industrial real estate investment trust (REIT)
) will issue its third-quarter 2013 results tomorrow, Oct 23,
before the market opens.
In the last quarter, it delivered a positive earnings surprise of
about 7.9% backed by a decent reduction in expenses. The
company's strategic measures and capital market moves have helped
enhance flexibility, extend maturities and lower interest
expenses. However, the question is - Will Prologis be able to
keep the earnings streak alive? Let's see how things have shaped
up for this announcement.
Our proven model conclusively shows that Prologis is likely to
beat the Zacks Consensus Estimate in the third quarter. That is
because a stock needs to have both a positive Earnings ESP and a
Zacks Rank #1 (Strong Buy) or at least Rank #2 or #3 for this to
happen. Fortunately, Prologis has the right combination of these
two key ingredients that is elaborated below.
Positive Zacks ESP: The
for Prologis is +2.44%. This is because the Most Accurate
estimate stands at 42 cents while the Zacks Consensus Estimate is
lower at 41 cents.
Zacks Rank: Prologis' Zacks Rank #3 (Hold) enhances the
predictive power of ESP. This combination of its Zacks Rank and
Earnings ESP makes us confident of an earnings surprise call in
the to-be-reported quarter.
What is Driving Better-than-Expected Earnings?
We believe that with a growing customer base, rise in e-Commerce
application and supply chain consolidation, there is an
increasing demand for Class-A facilities and Prologis stands to
benefit as it has the capacity to offer modern distribution
facilities in strategic infill locations. We expect this rising
demand for Prologis' facilities to drive its rent and occupancy
in the third quarter. Its leasing activities are also progressing
The company is also making concerted efforts towards increasing
its dominance in the industrial real estate market of Europe,
which is encouraging. During the third quarter, the company
penned a Build-to-Suit deal with Hi Logistics in UK for
facilities spanning over 700,000 square feet. A similar agreement
was inked with L'Oreal, the French cosmetics group for a 270,000
square feet space in France.
Also, it entered into a Build-to-Suit deal with Walmart.com
Brazil - WMB Comercio Eletronico LTDA, a unit of
Wal-Mart Stores Inc.
) global e-commerce organization for a distribution center, which
would span 576,000 square foot in Sao Paulo, Brazil.
Yet, with the sluggish economic growth, we are not overtly
optimistic on this stock. In fact, Prologis' activities during
the third quarter of the year were inadequate to win analysts'
confidence. As a result, the Zacks Consensus Estimate for the
quarter remained stable at 41 cents per share over the last 7
Stocks to Consider
Here are a couple of stocks you may want to consider, as our
model shows that these have the right combination of elements to
post an earnings beat this quarter:
Avalonbay Communities Inc.
) has an earnings ESP of +2.53 % and carries a Zacks Rank #3. It
is scheduled to report third quarter results on Oct 23, 2013
after the market close.
The earnings ESP for
Simon Property Group Inc.
) is +1.85% and it carries a Zacks Rank #3. The company is
scheduled to release third quarter results before the opening
bell on Oct 25, 2013.
AVALONBAY CMMTY (AVB): Free Stock Analysis
PROLOGIS INC (PLD): Free Stock Analysis
SIMON PROPERTY (SPG): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
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