Bank of America likes industrial real estate investment trusts, including Duke Realty (DRE) - Get Duke Realty Corporation Report, EastGroup Properties (EGP) - Get EastGroup Properties, Inc. Report, Prologis (PLD) - Get Prologis, Inc. Report and Rexford Industrial Realty (REXR) - Get Rexford Industrial Realty, Inc. Report.
“Strong fundamentals continue for the sector as tenants scramble to find space to solve their supply chain needs,” Bank of America analysts led by James Feldman wrote in a commentary.
The bullish factors:
“1) We forecast strong sector pricing power to drive at least 8 to 12% earnings and cash flow growth for multiple years;
“2) Our above-consensus estimates through 2023 for our buy-rated names suggest beats and raises will continue; and
“3) Sector implied cap rates look reasonable versus private market transactions.”
Feldman rates all four stocks as buys. He has price targets of $58 for Duke, $196 for EastGroup, $150 for Prologis and $70 for Rexford.
Duke shares ended up 1.3% at $53.02; EastGroup finished at $181.21, up 1.8%; Prologis rose 1.4% to $135.73; and Rexford gained 1.4% to $60.69.
Regarding Duke, Feldman cited the strength of its warehouse development. For EastGroup, he cited the secular demand tailwind for warehouse space and EGP's strong regional platform.
When it comes to Prologis, he mentioned the value of its global platform and balance sheet, offset by trade-war fears.
And Rexford? He pointed to the value of its “unique operating and acquisition platform in its infill Southern California industrial markets.”
The industrial real estate sector has soared in recent years, as the growth of e-commerce has sparked a need for warehouse space.