Shares of Prologis Inc. PLD have rallied 17.4% in the year-to-date period, outperforming the industry's growth of 7.3%.

This industrial real estate investment trust (REIT) targets investments in distribution facilities for customers who are engaged in global trade and depend on the efficient movement of goods through the global supply chain.

In January 2025, Prologis reported a fourth-quarter 2024 core funds from operations (FFO) per share of $1.50, outpacing the Zacks Consensus Estimate of $1.38. This compares favorably with the year-ago quarter’s figure of $1.26. The quarterly results reflected a rise in rental revenues and healthy leasing activity.

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Let us decipher the factors behind the surge in the stock price.

In a rising e-commerce market, companies are making immense efforts to improve supply-chain efficiencies, propelling demand for logistics infrastructure and efficient distribution networks. Given Prologis’ solid capacity to offer modern logistics facilities in some of the busiest distribution markets across the globe, it is well-poised to bank on this trend.

The solid demand for Prologis’ strategically located facilities has driven healthy operating performance over the past several quarters. In the fourth quarter of 2024, 46.5 million square feet of leases commenced in the company’s owned and managed portfolio.

Prologis continues to bolster its presence in high-barrier, high-growth markets through strategic acquisitions and development activities. In 2024, the company’s share of acquisitions amounted to $1.92 billion. For the same period, development stabilization aggregated $4.17 billion, while development starts totaled $1.34 billion. For 2025, the company anticipates acquisitions, at Prologis share, between $750 million and $1.25 billion. Development stabilization and development starts are each expected in the range of $2.25-$2.75 billion in 2025.

Moreover, the data center industry is currently experiencing significant growth, driven by the demands of the evolving needs of today’s digital economy, cloud and AI applications. To capitalize on this growing opportunity, Prologis is focusing on both warehouse conversions and ground-up developments.

Prologis maintains a healthy balance sheet position with ample flexibility that poises it well to capitalize on long-term growth opportunities. As of Dec. 31, 2024, the company had a total available liquidity of $7.38 billion. Its credit ratings as of Dec. 31, 2024, were A3 (Outlook Positive) from Moody’s and A (Outlook Stable) from Standard & Poor’s, enabling the company to borrow at an advantageous rate.

Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and Prologis remains committed to that. Last month, the company’s board announced a quarterly cash dividend of $1.01 per share of its common stock for first-quarter 2025. This represents a 5% hike from the prior payout. In the last five years, it has increased its dividend six times, and its five-year annualized dividend growth rate is 13.66%. Given the company’s solid operating platform and decent financial position compared with the industry, this dividend rate is expected to be sustainable over the near term.

Key Risks for Prologis

The recovery in the industrial market has continued for a long time and the growth of e-commerce sales is likely to stabilize to some extent in the upcoming quarters. Therefore, any robust performance is unlikely in the near term.

Analysts seem pessimistic about this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2025 FFO per share has declined marginally over the past month to $5.73.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Gladstone Land LAND and Sabra Healthcare REIT SBRA, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Gladstone’s 2025 FFO per share is pegged at 54 cents, which indicates year-over-year growth of 14.9%.

The Zacks Consensus Estimate for Sabra’s full-year FFO per share is $1.49, which indicates an increase of 3.5% from the year-ago period.

Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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