Is Prologis (PLD) Poised to Beat Earnings Estimates? - Analyst Blog

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Industrial real estate investment trust (REIT) Prologis Inc. ( PLD ) 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.

Earnings Whispers

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 Earnings ESP 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 well.

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. 's ( WMT ) 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 days.

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. ( AVB ) 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. ( SPG ) 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 Report

PROLOGIS INC (PLD): Free Stock Analysis Report

SIMON PROPERTY (SPG): Free Stock Analysis Report

WAL-MART STORES (WMT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AVB , PLD , SPG , WMT

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