Company Profile: PLD

Prologis, Inc. (PLD) is a leading logistics company focused on real estate and strategic capital. The company boasts the largest global portfolio of publicly traded warehouses, spanning 1.2 billion square feet.

Despite experiencing a slowdown in rental rate increases from the peaks of 2021-2022, Prologis continues to see organic growth through higher renewal and new lease rates. The company's growth is supported by its extensive footprint and additional services, positioning it well to potentially outperform its industrial competitors.

Revenue goals

Prologis is leveraging its extensive scale to address customer logistics challenges, presenting a high-margin opportunity that could be worth $1-$1.5 billion over the long term. The company is diversifying its income streams beyond traditional real estate by expanding into logistics services, creating significant growth prospects.

The acquisition of new customers from mergers and acquisitions in 2022-23 boosted its customer base to 6,700 customers, positioning the company to potentially hit its $1 billion revenue target by 2030.

Outlook maintained after Q2 results

For Q2 2024, Prologis reported core funds from operations (FFO) of $1.34 per diluted share, a decline from $1.83 per share the previous year but slightly above expectations. This year-over-year decrease reflects a challenging comparison due to a high promote income in the prior year.

Despite concerns over economic uncertainty and high interest rates, Prologis management has slightly raised its full-year core FFO guidance for 2024. The new guidance ranges from $5.39 to $5.47 per share, with the revised midpoint at $5.43 per share.

Although there was a drop in occupancy to 96.1% in Q2, the lowest measure in three years, there's potential for recovery in the latter half of the year as demand strengthens. This recovery could positively impact the 2024 core FFO.

Risk factors

Prologis experienced a decrease in period-end occupancy across most regions, reflecting a shift towards normalization in the logistics market after a strong demand period. Additionally, costs for property improvements and lease turnovers have increased due to a tight labor market and rising material costs, reflecting broader economic challenges. These factors could negatively impact the company's operations in the near to medium term.