A month has gone by since the last earnings report for Duke Realty (DRE). Shares have lost about 0.3% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Duke Realty due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Duke Realty Q1 FFO Beats Estimates on Higher Revenues
Duke Realty’s first-quarter 2019 core FFO per share of 33 cents surpassed the Zacks Consensus Estimate of 32 cents. Moreover, the figure came in ahead of the year-ago quarter’s reported tally of 30 cents.
Results indicate overall improved operations as well as increased investments in new industrial properties.
Rental and related revenues of nearly $210 million in the reported quarter improved 8.5% on a year-over-year basis. The figure also exceeded the Zacks Consensus Estimate of $205.9 million.
Quarter in Detail
Duke Realty leased around 2.8 million square feet of space during the March-end quarter. Tenant retention in the quarter was 82.7%. Moreover, the company registered same-property net operating income growth of 7.2% year over year. In fact, Duke Realty reported overall cash and annualized net effective rent growth related on new, and renewal leases of 9% and 23.4%, respectively.
As of Mar 31, 2019, the company’s total portfolio, including properties under development, was 93% leased, down 140 basis points (bps) from the prior-year quarter end. In-service portfolio as of the same date was 95.5% leased, down 150 bps from the year-earlier quarter’s reported figure. This decline is due to placing of speculative projects in service.
Notably, during the first quarter, the company initiated five development projects, with estimated costs of $169 million. As of Mar 31, 2019, the company’s development pipeline, with projected costs of $765 million, was 52% leased.
Further, during the quarter, the company expanded its presence in high-barrier markets through the acquisition of a 228,000-square-foot Class A property in Seattle. It also acquired a newly-developed 349,000-square-foot property in the Lehigh Valley of Pennsylvania. The properties were 72% leased on a combined basis.
Duke Realty exited first-quarter 2019, with $15.3 million of cash and cash equivalents, down from $17.9 million as of Dec 31, 2018.
Duke Realty raised its guidance for core FFO per share to $1.39-$1.45 for 2019 compared with the prior estimate of $1.37-$1.43.
The company revised its estimate for same-property NOI growth to 3.5-5% from 3.25-4.75%, backed by solid rental rate increases. The guidance for acquisitions of properties is $100-$300 million, and dispositions of non-strategic properties are projected at $350-$550 million. Moreover, the company expects $600-$800 million of development starts.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, Duke Realty has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Duke Realty has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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