Can Prologis Keep the Winning Streak Alive in Q2 Despite Challenges?

Prologis PLD is slated to report its second-quarter 2025 results on July 16, before the opening bell. In anticipation of the announcement, industry analysts and investors are eager to assess the company's performance and prospects in the current economic climate.In the last reported quarter, this leading industrial REIT reported a surprise of 2.90% in terms of core funds from operations (FFO) per share. The quarterly results reflected a rise in rental revenues and healthy leasing activity. However, high interest expenses were an undermining factor. Over the trailing four quarters, Prologis beat the Zacks Consensus Estimate in terms of FFO per share on all occasions, with the average beat being 4.18%. This is depicted in the graph below:Prologis, Inc. Price and EPS Surprise Prologis, Inc. price-eps-surprise | Prologis, Inc. QuoteUS Industrial Real Estate Market in Q2Per a Cushman & Wakefield report, in the second quarter of 2025, the U.S. industrial real estate sector remained resilient amid headwinds, with net absorption totaling 29.6 million square feet, roughly in line with the prior quarter but below its historical average. Though the pace of growth has cooled, absorption remained steady, reflecting sustained demand amid economic uncertainty and rising tariffs. Activity varied significantly by region and asset type. Vacancy continued its upward trend, rising 20 basis points sequentially to 7.1%. While for the first time since the second quarter of 2014, vacancy rose above 7%, but it remains just 10 basis points above the 15-year pre-pandemic historical average. Meanwhile, industrial asking rent growth slowed to 2.6% in the second quarter, its weakest pace since early 2020, as softening demand and rising vacancies are together putting the brakes on rent growth.Despite headwinds, leasing activity remained solid, totaling nearly 309 msf in the first half of the year, driven by large-scale deals and steady 3PL demand.New construction activity declined sharply, with completions hitting 71.5 msf, the lowest level since the first quarter of 2019. The under-construction pipeline has fallen to its lowest level (268.6 msf) since 2017, reflecting caution amid increased economic uncertainty, higher borrowing costs and elevated vacancies. Simultaneously, share of build-to-suit deliveries have almost doubled, rising from 17% a year ago to 30% in the first half of 2025.Factors to Note Ahead of PLD’s Q2 Earnings ReleasePrologis continues to demonstrate resilience in a shifting industrial real estate market, thanks to its premium asset base in high-demand locations. Its emphasis on targeted acquisitions and developments is expected to have supported its second-quarter results and positioned it to benefit from emerging opportunities despite broader market challenges.Prologis’ scale and cost advantages are likely to have played a key role in supporting its growth strategy. Backed by a resilient balance sheet and efficient capital access, the company remains financially well-positioned. During the review period, the company is likely to have demonstrated strong liquidity and stability, reinforcing its leadership position. However, the interest rate is still high and is a concern for Prologis. We expect interest expenses to have remained elevated during the second quarter.Projections for PLDThe Zacks Consensus Estimate for second-quarter revenues is currently pegged at $2.00 billion, which indicates a 7.9% year-over-year increase. Our estimate for average occupancy is 94.8%, which implies a 70 bps decrease from the prior quarter. The same-store net operating income is expected to rise 3.3% year over year. We expect interest expenses to be up 11.4% year over year in the second quarter.Prologis’ activities during the to-be-reported quarter were somewhat adequate for gaining analysts’ confidence. The Zacks Consensus Estimate for the second-quarter FFO per share has been revised a cent upward to $1.41 in the past two months. It implies a 5.2% increase year over year. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)What Our Quantitative Model Predicts for PLDOur proven model predicts a surprise in terms of FFO per share for Prologis this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.Prologis currently carries a Zacks Rank of 3 and has an Earnings ESP of +0.81%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Other Stocks That Warrant a LookHere are two other stocks from the broader REIT sector, SL Green Realty Corp. SLG and Extra Space Storage Inc. EXR, you may want to consider as our model shows that these also have the right combination of elements to report an FFO beat this quarter.SL Green Realty is slated to report quarterly numbers on July 16. SLG has an Earnings ESP of +2.20% and a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Extra Space Storage is slated to report quarterly numbers on July 30. EXR has an Earnings ESP of +2.43% and carries a Zacks Rank of 3 at present.Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Prologis, Inc. (PLD): Free Stock Analysis Report SL Green Realty Corporation (SLG): Free Stock Analysis Report Extra Space Storage Inc (EXR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks