Shares of Duke Realty Corporation DRE, a pure-play industrial property real estate investment trust (REIT), have been performing well, of late. In the past three months, the stock has rallied 12.2%, while the industry recorded growth of 9.5%.
In first-quarter 2018, the company posted encouraging results with respect to funds from operations (FFO) per share. In fact, the Q1 2018 FFO per share of 31 cents surpassed the Zacks Consensus Estimate by a penny. Results also reflected stellar growth in revenues. Moreover, it registered same-property net operating income growth of 3.4% year over year.
If you haven’t taken advantage of the share price appreciation yet, the time is right for you to bet on the stock, as it is poised to ride on the growth trajectory.
Key Driving Factors
Strong sales growth: In 2017, Duke Realty witnessed year-over-year rise of 6.9% in sales. In addition, year-over-year jump in sales for 2018 is estimated to be 7.97%. This compares favorably with the industry’s average of 3.65%. Strong organic growth makes us optimistic about Duke Realty’s operating performance over the long term.
FFO per share strength: The stock has enjoyed an impressive growth rate in FFO per share of 2.69% over the past 3-5 years. Further, FFO per share growth is projected to be 5.02% for 2018. In fact, we note that the FFO estimates for Duke Realty have been displaying a healthy uptrend. The company’s second-quarter 2018 FFO estimates marginally improved over the past 60 days. Further, concurrent with its earnings release, the company raised its 2018 guidance for core FFO per share to $1.26-$1.32, from the previous projection of $1.24-$1.30.
Superior return on equity (ROE): Duke Realty’s return on equity (ROE) of 5.98% is higher than the industry’s average of 5.03%. This depicts optimal utilization of equity and boosts investors’ confidence in the stock.
Lower debt/equity ratio: Duke Realty has a debt/equity ratio of 0.54, lower than the industry’s average of 0.84. As such, it enjoys high financial flexibility, which supports the company’s growth pursuits.
Focus on industrial real estate assets: Duke Realty has resorted to sale of suburban office assets and medical-office buildings in the past, in a bid to transform itself into a domestic-focused industrial property REIT. This augurs well amid the favorable market environment in this asset class. Specifically, amid recovering economy and job market gains, elevating consumption levels and healthy manufacturing environment; demand for warehouse and logistics real estate is anticipated to remain robust. This, in turn, is offering significant impetus to industrial REITs like Prologis Inc. PLD, Duke Realty and Liberty Property Trust LPT to flourish. Hence, opportunistic acquisitions of land sites and ability to identify high-quality properties have enabled the company to gain significant penetration in industrial real estate market.
Zacks Rank: The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A similar-ranked stock in the same space is Extra Space Storage EXR, with a Zacks Rank of 2. Its Zacks Consensus Estimate for 2018 FFO per share remained unchanged at $4.62 over the past month. The stock has returned 16.2% in six months’ time.
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