On Thursday, Evercore ISI updated its financial outlook on ProLogis (NYSE: NYSE:PLD), increasing the shares target to $123.00, up from the previous target of $119.00. The firm maintained an "In Line" rating for the stock.
ProLogis, a global leader in logistics real estate, has observed a 2% decline in market rent growth during the last quarter, which follows a 1% decrease in both the first quarter and the final quarter of the previous year. The majority of this downturn is attributed to softness in the Southern California market.
The company anticipates that rent growth outside of Southern California will be flat to slightly negative over the next 12 months. Including the Southern California region, ProLogis projects market rent growth to be between -5% to -2% before it begins to increase. Despite these trends, ProLogis has reiterated its Core Funds From Operations (FFO) guidance for the year, while also raising its guidance on property acquisitions and dispositions.
In addition, ProLogis has reduced its net promote expense forecast by $15 million to $65 million, which has contributed to an upward revision of the full-year Core FFO estimate by $0.01 at the midpoint, now standing at $5.43, up from $5.42. This updated guidance is slightly above Evercore ISI's own estimate of $5.39 for the fiscal year 2024 and the consensus estimate of $5.41.
Following the second-quarter results and revised guidance, Evercore ISI adjusted some operating assumptions, which did not significantly alter the firm's fiscal year 2024 Core FFO estimate of $5.39. However, the estimate for fiscal year 2025 has been increased by $0.01 to $5.98, which remains below the consensus estimate of $6.08.
The adjustment in the price target to $123.00 from $119.00 is partly due to a lower risk-free rate assumption within the discounted cash flow (DCF) model, which has been reduced from 4.35% to 4.15%, and an increase in the Adjusted Funds From Operations (AFFO) multiple for the core business from 22x to 23x.
In other recent news, ProLogis, a global leader in logistics real estate, has experienced several adjustments in its stock targets by various analysts due to changing market conditions and demand uncertainties.
BMO Capital maintained a Market Perform rating on ProLogis shares with a steady price target of $115.00, citing a potential downgrade in the company's 2024 guidance due to weakening demand for warehouse space.
Mizuho Securities reduced its price target to $120, reflecting a modest downshift in core growth expectations for fiscal years 2024 and 2025. RBC Capital Markets lowered its price target to $124, despite maintaining an Outperform rating, following ProLogis' first-quarter results for 2024 which indicated a near-term slowdown in leasing activity. Baird also adjusted its price target to $117.00, reflecting a more cautious outlook on near-term performance due to changing economic conditions in the industrial sector.
In addition to these evaluations, ProLogis announced its quarterly cash dividends, declaring 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. These recent developments reveal a mixed outlook for ProLogis, with analysts' expectations and market trends suggesting both challenges and opportunities for the company in the near future.
InvestingPro Insights
Recent analysis from InvestingPro has highlighted several key factors that may influence investor decisions regarding ProLogis (NYSE: PLD). Notably, ProLogis has demonstrated a commitment to shareholder returns, having raised its dividend for 10 consecutive years, with a current dividend yield of 3.12%. This aligns with the company's long-term track record, as it has maintained dividend payments for 14 consecutive years. Additionally, ProLogis stands out as a prominent player in the Industrial REITs industry, which could offer stability amidst market fluctuations.
InvestingPro data reveals a market capitalization of $115.96 billion and a robust revenue growth of 24.62% over the last twelve months as of Q1 2024. Despite analysts anticipating a sales decline in the current year, ProLogis has generated strong returns over the last three months, with a 18.71% price total return. These metrics suggest that while there may be short-term headwinds, the company's long-term financial health remains solid. The P/E ratio is currently at a high of 40.1, which may indicate the stock is trading at a premium, possibly due to its consistent performance and market position.
For investors seeking more comprehensive insights, there are additional InvestingPro Tips available that delve into ProLogis's financial health and market performance. These tips, along with real-time metrics, can be accessed at Investing.com/pro/PLD. To gain a more in-depth understanding and for exclusive content, readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, which includes a total of 14 InvestingPro Tips for ProLogis.
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