Prologis Up 19% in Three Months: Will It Continue to Rise?

Shares of Prologis Inc. PLD have rallied 19% in the past three months, outperforming the industry's growth of 16.1%.

This industrial real estate investment trust (REIT) targets investments in distribution facilities for customers who are engaged in global trade and depend on the efficient movement of goods through the global supply chain. Apart from having a solid portfolio and gaining from healthy industry fundamentals, PLD stock is benefiting from the narrative surrounding the interest rate cut in the near term.

In July 2024, Prologis reported a second-quarter 2024 core FFO per share of $1.34, outpacing the Zacks Consensus Estimate by a penny. The quarterly results reflected a rise in rental revenues and healthy leasing activity.

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Factors Behind PLD Stock's Price Surge: Will the Trend Last?

In a rising e-commerce market, companies are making immense efforts to improve supply-chain efficiencies, propelling demand for logistics infrastructure and efficient distribution networks. Given Prologis' solid capacity to offer modern logistics facilities in some of the busiest distribution markets across the globe, it is well-poised to bank on this trend.

The solid demand for Prologis' strategically located facilities has driven healthy operating performance over the past several quarters. In the second quarter of 2024, 46.6 million square feet of leases commenced in the company's owned and managed portfolio with an average occupancy level of 96.1%.

Prologis continues to bolster its presence in high-barrier, high-growth markets through strategic acquisitions and development activities. In the second quarter of 2024, the company's share of building acquisitions amounted to $279 million. Development stabilization aggregated $2.04 billion, with 31.9% being built to suit, while development starts totaled $300 million, with 15.7% being built to suit.

Prologis maintains a healthy balance sheet position with ample flexibility that poises it well to capitalize on long-term growth opportunities. As of June 30, 2024, this industrial REIT had a total available liquidity of $6.45 billion. As of the same date, the company's weighted average interest rate on its share of the total debt was 3.1%, with a weighted average term of 9.3 years and no significant debt maturities until 2026.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Prologis remains committed to that. In the last five years, Prologis has increased its dividend five times, and its five-year annualized dividend growth rate is 14.31%. Given the company's solid operating platform, opportunities for growth and decent financial position compared with the industry, this dividend rate is expected to be sustainable over the near term.

Key Risks for Prologis

The recovery in the industrial market has continued for a long, and the growth of e-commerce sales is likely to stabilize to some extent in the upcoming quarters. Therefore, any robust performance is unlikely in the near term.

Analysts seem pessimistic about this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 FFO per share has declined marginally over the past month to $5.42.

Stocks to Consider

Some better-ranked stocks from the REIT sector are Cousins Properties CUZ and Lamar Advertising LAMR, each carrying a Zacks Rank of 2 (Buy) at present.

The Zacks Consensus Estimate for Cousins Properties' 2024 FFO per share has moved marginally northward over the past two months to $2.66.

The Zacks Consensus Estimate for Lamar Advertising's 2024 FFO per share has increased marginally over the past week to $8.09.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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