UPDATE 1-Prologis misses rental income estimates on weak freight demand
(Adds commentary from call, background in paragraphs 7, 8)
Jan 17 (Reuters) - Warehouse-focused real estate investment trust (REIT) Prologis missed analyst estimates for fourth-quarter rental income on Wednesday, hurt by persistent weakness in freight demand.
A slowdown in freight demand from pre-pandemic levels due to an uncertain macroeconomic environment has led to companies delaying decisions related to warehouse expansion, leading to higher vacancies in key markets, including Southern California.
Prologis warned in October that "negative customer sentiment" will weigh on demand until the economy stabilizes. The company had also said it expects the current trend of supply outpacing demand for warehousing to continue, with a reversal later in 2024.
The REIT, which boasts of customers such as Amazon, FedEx, UPS and Walmart, reported rental income of $1.75 billion, compared with the average analyst estimate of about $1.81 billion, as per LSEG data.
Chief Finance Officer Timothy Arndt said that going ahead, the company may benefit from shipment volumes moving back to the West after escalating issues in both the Suez and Panama Canals.
Last week, Suez canal authority head Osama Rabie
said
that dollar revenue from Egypt's Suez Canal is down 40% from the beginning of the year compared to 2023, after attacks on ships by Yemen's Houthis caused major shippers to divert away from the route.
Meanwhile, clients using the
Panama Canal
are looking for alternative shipping methods, including railroads, as the canal faces restrictions due to an ongoing drought.
Last month, brokerage Mizuho said Prologis' sub-markets were seeing a "fair amount of deceleration" in demand, coupled with slow rent growth, leading to a greater risk to funds from operation (FFO) in 2024.
San Francisco, California-based Prologis forecast core FFO between $5.42 and $5.56 per share for the current year, compared with analysts' estimate of $5.49 per share.
It reported a core FFO of $1.26 per share for the quarter ended Dec. 31, in line with analysts' estimates. (Reporting by Aishwarya Jain in Bengaluru; Editing by Maju Samuel)
