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Can Prologis (PLD) Surprise Investors this Earnings Season?

We expect Prologis, Inc.PLD to beat earnings expectations when it reports third-quarter 2015 results on Oct 20, before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that Prologis - the San Francisco, CA-based real estate investment trust ("REIT") - has the right combination of two key ingredients required for an earnings beat.

Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +3.45%. This is a meaningful and leading indicator of a likely positive earnings surprise for the company.

Zacks Rank : Prologis carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

What is Driving Better-than-Expected Earnings?

Amid improving fundamentals in the industrial real estate market, Prologis focuses on actively leveraging the global growth opportunities. Recently, this REIT inked five new development lease deals across three key markets in China. This is consistent with the company's investment strategy of adding top-class distribution facilities in prime locations, where supply is limited.

Further, with decent growth in the industrial market, thanks to the fast growing e-commerce industry and supply-chain consolidation, we believe Prologis will retain sufficient scope to ride the growth trajectory, backed by its recent strategic deals.

Nevertheless, we anticipate that any robust improvement in the performance of this industrial REIT might be limited in the near term. This is due to the fact that recovery in the industrial market has been continuing for long, because of which, chances of a striking decrease in availability rates or solid rent growth are lesser.

Notably, during the quarter, Prologis' performance was inadequate to win analysts' confidence. As a result, the Zacks Consensus Estimate for the stock has remained stable at 58 cents per share over the last 7 days.

Other Stocks to Consider

You could also consider stocks in the REIT sector that have the combination of a positive Earnings ESP and a favorable Zacks Rank, and are hence poised for an earnings beat this quarter:

Digital Realty Trust Inc. DLR has an Earnings ESP of +2.34% and a Zacks Rank #3. The company will report third-quarter results on Oct 29.

Hospitality Properties Trust HPT has an Earnings ESP of +1.08% and a Zacks Rank #2. The company will report third-quarter results on Nov 3.

Acadia Realty Trust AKR has an Earnings ESP of +2.86% and a Zacks Rank #3. The company will report third-quarter results on Nov 3.

Note: FFO, 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.

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PROLOGIS INC (PLD): Free Stock Analysis Report

DIGITAL RLTY TR (DLR): Free Stock Analysis Report

ACADIA RLTY TR (AKR): Free Stock Analysis Report

HOSPITALITY PRP (HPT): 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 Nasdaq, Inc.


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

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