AMB Property: Earnings Preview

Apr.19.11 | About: AMB Property (AMB)

AMB Property Corp. (NYSE:AMB), a leading global provider of distribution facilities, is scheduled to report its fiscal 2011 first quarter earnings on April 20, 2011. The current Zacks Consensus Estimate for the first quarter is 32 cents per share, representing a year-over-year growth of about 3%.

Fourth Quarter Recap

AMB reported fourth quarter 2010 recurring fund from operations (FFO) of 33 cents per share compared with 32 cents in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and other non-cash expenses to net income.

During the quarter, AMB commenced leases spanning approximately 7.7 million square feet in its global operating portfolio. For full year 2010, the company leased a record 32.0 million square feet. Operating portfolio occupancy increased 110 bps sequentially from the third quarter to 93.7% at the end of fourth quarter 2010.

Same-store net operating income (cash basis), without the effect of lease termination fees, increased 0.9% during the quarter compared with the year-ago period primarily due to an increase in occupancy. Average rent change on lease renewals and rollovers in the operating portfolio of the company decreased 11.9% on trailing four-quarter basis.

AMB completed over $1.9 billion of financings during the reported quarter, which included $1.5 billion of wholly-owned debt consisting of the renewal of its two lines of credit, a corporate term-loan, a new bond issuance, and $391 million for its co-investment ventures in Europe, Japan and the U.S.

For full year 2010, the company completed financings worth approximately $4.0 billion, thereby extending the weighted average maturity of its share of debt to 4.8 years. As of December 31, 2010, the company's share of total debt (including joint venture debt) to total assets was 43%.

At year-end 2010, the company had approximately $1.6 billion of liquidity (including $1.4 billion available under its credit facility and $260 million of cash and cash equivalents). For full year 2011, AMB reiterated its earlier recurring FFO guidance in the range of $1.30 to $1.40 per share.

Agreement of Analysts

In the last 7 days, there were no earnings estimate revisions for the first quarter and fiscal 2011 as analysts, in general, were circumspect about the future outlook of the company. In the last 30 days, none of the 16 analysts covering the stock have revised their earnings estimates upward for the first quarter, while only one has lowered it. For fiscal 2011, only 2 out of 16 analysts covering the stock has reduced earnings estimate in the last 30 days, while none have increased them.

Magnitude of Estimate Revisions

Earnings estimates have remained stagnant for the last 30 days for the first quarter at 32 cents, meaning that analysts were overtly cautious about the performance of the company. However, for fiscal 2011, earnings estimates decreased by a penny to $1.37, signifying that the analysts were somewhat bearish about the long-term performance of AMB.

Neutral on AMB

We currently have a ‘Neutral’ recommendation on AMB, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1-3 months. We also have a ‘Neutral’ recommendation and a Zacks #4 Rank (short-term ‘Sell’) for Duke Realty Corp. (NYSE:DRE), a competitor of AMB.