On Jun 27, 2013, we reiterated our long-term recommendation on
), a San Francisco-based industrial real estate investment trust
(REIT), at Neutral. The move reflects the company's solid
operating platform, recent deals and concerted efforts to
capitalize on promising opportunities across the globe. Yet, with
sluggish economic growth, we are not overtly optimistic on the
stock and believe that the risk/reward profile is currently
Prologis' first-quarter 2013 core FFO (funds from operations) per
share of 40 cents was in line with the Zacks Consensus Estimate
and the prior-year quarter figure. Results reflected decent
revenues in the reported quarter, and completion of the
Japan-REIT IPO as well as the European joint venture. Moreover,
its strategic measures have helped it lower its overall debt
With growth in e-Commerce, 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
Also, the recent build-to-suit deal in Poland is a strategic fit
as it will enable the company to substantially penetrate the
industrial real estate market of Europe. Moreover, its
build-to-suit deal in the first quarter with end-to-end
e-Commerce service provider - SpeedFC, a subsidiary of
) and the transaction with Chinese logistics provider, Deppon are
expected to contribute meaningfully to the company's top line.
Yet, its increasing international presence might negatively
impact Prologis amid economic fluctuations and impair its
top-line growth. In addition, market vacancy increases will
mitigate Prologis' ability to push through rental-rate increases.
Also, rising interest rates would increase its cost of financing.
For Prologis, the Zacks Consensus Estimates for 2013 and 2014 FFO
per share remained stable at $1.62 and $1.80 per share,
respectively, over the last 30 days. Hence, the stock carries a
Zacks Rank #3 (Hold).
Other REITs to Consider
Two other REITs that are worth considering include
Extra Space Storage Inc.
), which has a Zacks Rank # 1(Strong Buy), and
) that has a Zacks Rank # 2 (Buy).
Funds from operations, a widely used metric to gauge the
performance of REITs, are obtained after adding depreciation and
amortization and other non-cash expenses to net income.
CUBESMART (CUBE): Free Stock Analysis Report
EXTRA SPACE STG (EXR): Free Stock Analysis
NAVARRE CORP (NAVR): Free Stock Analysis
PROLOGIS INC (PLD): Free Stock Analysis
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