Duke Realty (DRE) Up 7.5% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Duke Realty Corporation DRE. Shares have added about 7.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is DRE due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Duke Realty's Q1 FFO and Revenues Surpass Estimates
Duke Realty’s first-quarter 2018 FFO per share of 31 cents surpassed the Zacks Consensus Estimate by a penny. Results reflect better-than-expected growth in revenues. However, the figure was lower than the year-ago tally of 32 cents.
The company witnessed a decline in core FFO per share, which was 30 cents for the quarter under review compared with 32 cents recorded in first-quarter 2017. Results reflect the first-quarter 2017 inclusion of the operations of its medical office properties that were sold in phases in mid to late 2017.
Total revenues of $234.6 million in the reported quarter jumped 29.5% on a year-over-year basis, handily surpassing the Zacks Consensus Estimate of $183.8 million.
Quarter in Detail
Duke Realty leased around 6.9 million square feet of space in the reported quarter. Its tenant retention for the quarter was 68% and re-lease was 94% for all the expiring leases. Moreover, it registered same-property net operating income growth of 3.4% year over year. In fact, the company reported overall cash and annualized net effective rent growth on new and renewal leases of 12% and 25.6%, respectively.
As of Mar 31, 2018, the company’s total occupancy, including properties under development, was 94.4%, up 60 basis points (bps) from the prior-quarter end. In-service occupancy as of the same date was 97%, up 130 bps from the prior-quarter figure.
Notably, during the first quarter, the company commenced $226 million of developments that aggregated 2.5 million square feet of space. Of this 45% pre-leased.
Duke Realty exited the reported quarter with $160.9 million of cash and cash equivalents, significantly up from $67.6 million as of Dec 31, 2017.
2018 Guidance
Duke Realty updated 2018 guidance for core FFO per share of $1.26-$1.32, up from $1.24-$1.30.
According to the company, lease up of its development pipeline and acquisitions occurred faster-than-expected and the company’s guidance is based on the increased occupancy in newer properties.
Dividend Update
Concurrent with its earnings release, Duke Realty announced a quarterly cash dividend on common stock of 20 cents per share. The first-quarter dividend will be paid on May 31 to shareholders of record as of May 16, 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to one lower.
Duke Realty Corporation Price and Consensus
Duke Realty Corporation Price and Consensus | Duke Realty Corporation Quote
VGM Scores
At this time, DRE has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our styles scores.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, DRE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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