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DRE

Duke Realty NYSE:DRE Stock Report

Last Price

US$48.20

Market Cap

US$18.8b

7D

-2.2%

1Y

-2.4%

Updated

03 Oct, 2022

Data

Company Financials +

Duke Realty Corporation Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Duke Realty
Historical stock prices
Current Share PriceUS$48.20
52 Week HighUS$66.22
52 Week LowUS$47.12
Beta0.72
1 Month Change-16.48%
3 Month Change-15.20%
1 Year Change-2.45%
3 Year Change42.48%
5 Year Change66.09%
Change since IPO370.81%

Recent News & Updates

Sep 08

Duke Realty: Great Company, But Too Expensive To Buy

Summary DRE is well-poised to benefit from the increase in rental rates, it has a strong balance sheet and great credit ratings. Duke’s current portfolio is stable and its new developments concentrate in very low vacancy areas. The current valuation is too expensive for new investors as Prologis offered Duke shareholders 0.475 shares of PLD after the acquisition. Investment thesis Duke Realty Corporation (DRE) is well-poised to benefit from the double-digit increase in rental rates and the rise in demand for its strategically located high-quality industrial real estate properties. 52% of the company's new developments have already been pre-leased. In addition, DRE has great expansionary efforts and a strong balance-sheet position. The only downside is that the company trades at the fair valuation of the Prologis (PLD) acquisition with a very low dividend yield at the moment. Duke Realty's business model DRE is a U.S.-only logistics REIT. The company is a member of the S&P 500 index. The management's main goal is to acquire, develop and rent out top-tier logistics facilities across the country. They have a highly reliable tenant base, their Top 10 tenants include Amazon (AMZN), Home Depot (HD), and UPS (UPS). DRE's portfolio of modern (the average year of the properties is 13 years old) and high-quality logistics facilities (they have the largest square foot properties among the company's peers) makes it well-poised to capitalize on growing and favorable industrial real estate market fundamentals. Company Presentation External trends In the last 2-3 years the warehouse market was booming like never before. The demand was very high due to the pandemic and the e-commerce businesses expanded rapidly. In addition, the supply was tight and there were relatively few quality warehouses in great locations. Now developers starting to notice that tenant demand is cooling, due to numerous new warehouse developments finished in recent years the supply has been rising and the U.S. economy shows signs of weakness. This means investors have to notice the short-term trend change and adjust their REIT portfolios accordingly. However, I would not consider massive logistics REIT selloffs due to this upcoming short-term bust cycle. Prologis expects rent growth of 22% in the U.S. during the year with vacancy rates remaining near all-time lows of 3.3%. Duke's portfolio is stable and its new developments concentrate in very low vacancy areas. I believe that during the next years rental rates will keep rising above inflation, which means investors can expect nice FFO and CAD figures. At the same time, I also expect that vacancy rates will increase not because the current tenants will leave but because newly built warehouses could be harder to rent out in a recession. But even if vacancy rates increase by 50-100 basis points the elevated rental income will compensate and investors will see shareholder value growth. Valuation Duke Realty maintains a robust balance sheet position, it has a conservative 65-75% AFFO payout ratio and its development pipeline is already 52% pre-leased. The company ended the second quarter with more than $40 million of cash and cash equivalents and has no significant debt maturities until 2026. It also has a favorable credit rating of Baa1/BBB+, which enables DRE to borrow at a favorable rate. This credit rating might be even better after the Prologis-Duke merger. This gives Duke Realty enough financial flexibility and facilitates its development activities. In terms of valuation, Prologis made a clear valuation of the company when it offered $26 billion for the company. Duke Realty shareholders will receive 0.475 of a Prologis share for each Duke Realty share owned. This means that the current valuation is spot on (PLD - $123*0,475= $58.425). DRE is trading almost exactly at this price. Of course, the price of PLD will change until the acquisition happens, it is expected to close in the fourth quarter of 2022 but I do not believe much stock price appreciation will happen to PLD. This valuation is also supported by the dividend yield. An under 2% dividend yield is anything but attractive for DRE. I would consider it a great buying opportunity above a 3% dividend yield. Zacks.com Company-specific Risks Duke Realty is in a stable position. I see no existential threats to its business model or its financial health. There are only small risk factors that investors should be aware of. A development boom in the warehouse market and among logistical properties may increase competition and curb pricing power. Amazon has started to cancel lease agreements for the future which might sound scary but Amazon represented only 1% of Duke Realty's new leasing and 3% of development starts. The rising supply of warehouses and vacancy levels might cause some pressure in the upcoming quarters. It is also worth mentioning that its huge development pipeline exposes the company to various operational risks such as construction cost overruns (especially with soaring material costs and labor costs) and lease-up risks. DRE's dividend The company has been a consistent dividend payer for 27 years. In addition, the management has been raising the dividend for 7 consecutive years. Its FFO payout ratio is well covered, it is approximately around 60%. Its AFFO payout ratio is at healthy levels of about 65-75%. Analysts estimate a 9.8% increase which is very close to the current and past months' U.S. CPI. In this high inflation environment, we can safely say that DRE is a good choice for income investors. The table is created by the author. All figures are from the company's financial statements and SA Earnings Estimates.

Sep 01

Duke Realty declares $0.28 dividend

Duke Realty (NYSE:DRE) declared $0.28/share quarterly dividend, in line with previous. Forward yield 1.9% Payable Sept. 30; for shareholders of record Sept. 15; ex-div Sept. 14. See DRE Dividend Scorecard, Yield Chart, & Dividend Growth.

Shareholder Returns

DREUS REITsUS Market
7D-2.2%0.3%1.0%
1Y-2.4%-19.2%-20.0%

Return vs Industry: DRE exceeded the US REITs industry which returned -20.4% over the past year.

Return vs Market: DRE exceeded the US Market which returned -23.2% over the past year.

Price Volatility

Is DRE's price volatile compared to industry and market?
DRE volatility
DRE Average Weekly Movement4.0%
REITs Industry Average Movement4.2%
Market Average Movement6.8%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: DRE is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: DRE's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
1972340Jim Connorhttps://www.dukerealty.com

Duke Realty Corporation owns and operates approximately 159 million rentable square feet of industrial assets in 20 major logistics markets. Duke Realty Corporation is publicly traded on the NYSE under the symbol DRE and is a member of the S&P 500 Index.

Duke Realty Corporation Fundamentals Summary

How do Duke Realty's earnings and revenue compare to its market cap?
DRE fundamental statistics
Market CapUS$18.75b
Earnings (TTM)US$947.84m
Revenue (TTM)US$1.12b

19.6x

P/E Ratio

16.5x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
DRE income statement (TTM)
RevenueUS$1.12b
Cost of RevenueUS$280.15m
Gross ProfitUS$842.07m
Other Expenses-US$105.77m
EarningsUS$947.84m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)2.46
Gross Margin75.04%
Net Profit Margin84.46%
Debt/Equity Ratio60.7%

How did DRE perform over the long term?

See historical performance and comparison

Dividends

2.3%

Current Dividend Yield

66%

Payout Ratio