Tuesday, BTIG maintained its Buy rating on ProLogis (NYSE: NYSE:PLD), with a steady price target of $154.00. The firm updated its core FFO per share estimate for 2024, increasing it slightly by $0.01 to $5.43, following the company's second-quarter performance. However, the 2025 core FFO per share forecast was reduced by $0.20 to $6.00, mainly due to anticipated lower promote revenue from the ProLogis European Logistics Fund in the third quarter of 2025.
As ProLogis approaches its third-quarter earnings report, BTIG's analysis focuses on two key questions: the potential impact of maintaining guidance and rent growth assumptions on the stock, and insights into a demand recovery. Despite a decrease in net effective rent growth projections for the next 12 months, BTIG suggests that meeting guidance could positively influence the stock.
The firm anticipates that ProLogis' average occupancy rates may align with the lower end of the forecast range (95.75%-96.75% for the fiscal year), which could be balanced by robust leasing spreads and increased strategic capital revenue. BTIG expects strategic capital contributions to accelerate this quarter, estimating a rise to $864 million from $240 million in the second quarter.
BTIG also notes the potential effects of the resolved East Coast and Gulf port strike, speculating that recent improvements in net absorption, especially in Northern New Jersey and the Inland Empire, might have been due to a pull-forward of demand. This could mean that a clear demand recovery may be delayed until further into 2025.
Despite these considerations, BTIG remains optimistic about a demand uptick in early 2025, driven by increased consumption from higher government spending, which could help alleviate the oversupply issues currently affecting the industrial sector. This outlook underpins the firm's decision to maintain the Buy rating and $154 price target for ProLogis.
In other recent news, ProLogis, a logistics real estate firm, has seen several adjustments in its financial outlook. Morgan Stanley maintains a positive outlook on ProLogis, projecting a 7.3% growth in same-store net operating income (NOI) and a 7.5% year-over-year growth in funds from operations (FFO) for 2025. This is based on the expectation that Southern California, a significant market for the company, will continue to perform strongly.
Evercore ISI, however, trimmed its price target for ProLogis to $122, reflecting a more conservative outlook on rent growth and net operating income projections. RBC Capital downgraded ProLogis stock to a Sector Perform rating from an Outperform rating, citing limited medium-term upside.
Citi raised its price target for ProLogis to $150, maintaining a Buy rating, based on the company's improved fundamentals. Argus also increased its price target for ProLogis from $120 to $135 while maintaining a Buy rating, indicating confidence in the company's growth potential.
ProLogis has also issued $1.1 billion in new debt securities for general corporate purposes, including repaying borrowings under global lines of credit. Additionally, ProLogis has declared a dividend of $0.96 per share on its common stock and a dividend of $1.0675 per share on the 8.54% Series Q Cumulative Redeemable Preferred Stock.
InvestingPro Insights
To complement BTIG's analysis, recent data from InvestingPro offers additional context on ProLogis's financial position and market performance. The company's market capitalization stands at $113.41 billion, reflecting its significant presence in the Industrial REITs sector. ProLogis's P/E ratio of 39.52 and adjusted P/E ratio of 51.82 for the last twelve months as of Q2 2024 indicate that the stock is trading at a premium valuation, aligning with BTIG's optimistic outlook.
InvestingPro Tips highlight ProLogis's strong dividend history, having raised its dividend for 10 consecutive years and maintained payments for 14 years. This consistent dividend growth, coupled with a current dividend yield of 3.19%, may appeal to income-focused investors. The company's profitability over the last twelve months and analysts' expectations of continued profitability this year support BTIG's positive stance.
However, investors should note that ProLogis is trading at a high earnings multiple, which could be a consideration in light of BTIG's revised 2025 FFO estimates. Additionally, analysts anticipate a sales decline in the current year, which may impact the company's near-term performance.
For readers interested in a more comprehensive analysis, InvestingPro offers 5 additional tips and a range of financial metrics to further evaluate ProLogis's investment potential.
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