Prologis, Inc. (NYSE:PLD) Nareit REITweek: 2025 Investor Conference Call June 4, 2025 10:15 AM ET Company Participants Daniel Stephen Letter - President & Director Timothy D. Arndt - Chief Financial Officer Conference Call Participants Michael Goldsmith - UBS Investment Bank, Research Division Michael Goldsmith Well, thank you, and good day, everyone. Welcome to the Prologis fireside chat. I'm Michael Goldsmith, the U.S. REIT analyst at UBS. I am pleased to introduce Dan Letter, President and CEO of Parent; ...

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Core Insights - The TJX Companies, Inc. (TJX) experienced a 5% drop in shares following the release of its first-quarter fiscal 2026 results, underperforming compared to the Zacks Retail - Discount Stores industry, which declined 1%, and the broader S&P 500, which increased by 0.2% [1][7]. Financial Performance - TJX reported net sales of $13,111 million for the first quarter, reflecting a 5% year-over-year increase, with consolidated comparable store sales rising by 3% [5][10]. - Earnings per share (EPS) for the quarter were 92 cents, a slight decrease from 93 cents in the same quarter last year [5][7]. - The company reaffirmed its fiscal year 2026 outlook, projecting comparable store sales growth of 2% to 3% and EPS between $4.34 and $4.43, indicating a 2% to 4% increase from the previous year's EPS of $4.26 [10][24]. Segment Performance - Comparable store sales growth was reported as follows: 2% at Marmaxx (U.S.), 4% at HomeGoods (U.S.), and 5% at both TJX Canada and TJX International (Europe and Australia) [8][10]. Strategic Outlook - Management expressed confidence in the company's ability to attract value-conscious shoppers despite macroeconomic challenges, emphasizing the strength of its off-price retail model and broad product assortments [9][11]. - TJX added 36 new stores in the first quarter, bringing the total to 5,121 locations, and is focusing on enhancing its e-commerce capabilities [13]. Valuation and Market Position - TJX is currently trading at a forward P/E ratio of 27.75X, which is lower than the industry average of 34.17X, making it attractive for value-focused investors [14]. - The stock is trading above its 50-day and 200-day moving averages, indicating growing market confidence in its growth potential [16]. Challenges and Risks - The company faces rising operating costs due to inflation and wage increases, which may pressure margins [17]. - Tariff-related pressures and foreign exchange fluctuations are anticipated to impact profitability, with management projecting a gross margin decline of 40 basis points year-over-year [18][19]. - Recent downward revisions in earnings estimates reflect cautious sentiment among investors, with the consensus estimate for EPS declining to $1.00 for the current quarter and $4.46 for the fiscal year [20][24].

Core Insights - Howmet Aerospace Inc. (HWM) is strengthening its position in the commercial aerospace market, which is currently its primary growth driver [1] - The commercial aerospace market is experiencing solid momentum due to increased global air travel and a rise in wide-body aircraft orders [2] Commercial Aerospace Market Performance - In Q1 2025, revenues from the commercial aerospace market for Howmet rose by 9% year over year, accounting for 52% of the company's total business [2][8] - Airlines are heavily investing in greener technologies, leading to increased demand for fuel-efficient aircraft and engine spares, which benefits Howmet [3][8] - Despite strong growth, the commercial aerospace market faces challenges, including slower-than-expected recovery in Boeing 787 and Airbus A350 production due to delays and supply-chain disruptions [3] Peer Performance - RTX Corporation reported 8% organic sales growth in Q1 2025, driven by strength in the commercial aerospace market, with double-digit gains in aftermarket sales [4] - GE Aerospace is benefiting from solid demand for its engines and services, signing new deals with major customers, including orders for over 75 LEAP engines [5][6] Financial Performance and Valuation - Howmet's shares have surged 104% over the past year, significantly outperforming the industry's growth of 19.9% [7] - The company is trading at a forward price-to-earnings ratio of 46.12X, above the industry average of 26.59X [10] - The Zacks Consensus Estimate for HWM's earnings has been rising, with current estimates for Q2 2025 at $0.86 and for the current year at $3.46 [11][12]

Core Insights - Citigroup Inc. is undergoing a transformation to streamline operations and reduce expenses, including a significant job cut plan of 20,000 positions by 2026, which represents about 8% of its global workforce [1][10] - The bank is focusing on growth in core businesses by exiting consumer banking in 14 markets across Asia and EMEA, reallocating capital to higher-return segments like wealth management and investment banking [2] - Citigroup has successfully exited consumer banking in nine countries and is winding down operations in Korea and Russia while preparing for an IPO of its consumer banking operations in Mexico [3][4] Financial Performance and Projections - The company anticipates a compounded annual growth rate of 4-5% in revenues by the end of 2026, with expected annualized run rate savings of $2-2.5 billion [5] - Management projects a return on tangible common equity of 10-11% by 2026 [5] - Citigroup's shares have increased by 10.4% year-to-date, outperforming the industry growth of 9.6% [8] Valuation Metrics - Citigroup trades at a forward price-to-earnings (P/E) ratio of 9.42X, which is below the industry average of 13.70X [12] - Earnings estimates for 2025 and 2026 have been revised upward, indicating a year-over-year rise of 23% and 25.9%, respectively [14]

Industry Overview - The Zacks Wireless National industry is facing high capital expenditures for infrastructure upgrades, uncertainty from tariff threats, supply-chain disruptions due to geopolitical tensions, and high customer inventory levels. However, it is expected to benefit from accelerated 5G rollout and increased fiber densification in the long run [1][4]. Current Market Dynamics - T-Mobile US, Verizon Communications, and Gogo are positioned to gain from rising demand for scalable infrastructure to support sustainable networks, driven by the proliferation of the Internet of Things (IoT), wireless traction, and solid broadband momentum [2]. Industry Description - The industry includes firms providing a wide range of communication services such as wireless, wireline, data/broadband, video, managed networking, and cloud-based services to both retail consumers and businesses. It also encompasses edge computing services for optimized application traffic routing [3]. Challenges Facing the Industry - High raw material prices and tariff impositions have disrupted supply chains and inflated equipment costs, impacting profitability. Increased competition from over-the-top service providers and price-sensitive customer retention strategies are expected to intensify challenges [4][6]. Growth Opportunities - The deployment of 4G LTE Advanced technologies and expansion of fiber optic networks are enhancing data speeds and capacity. The use of C-Band spectrum is expected to improve coverage in both rural and urban areas, leading to significant customer experience enhancements as the 5G ecosystem evolves [5]. Financial Performance - The Zacks Wireless National industry has outperformed the S&P 500 and the broader Zacks Computer and Technology sector over the past year, with a growth of 27.3% compared to 10.8% for the S&P 500 and 9.2% for the sector [9]. Valuation Metrics - The industry is currently trading at a trailing 12-month enterprise value-to-EBITDA (EV/EBITDA) of 9.38X, significantly lower than the S&P 500's 16.85X and the sector's 16.58X. Over the past five years, the industry has seen a range from 5.88X to 9.78X [12]. Notable Companies - **Gogo**: Focused on business aviation connectivity, Gogo has restructured its business model post-divestiture of its commercial in-flight connectivity division, improving liquidity and unlocking new opportunities. It has delivered an earnings surprise of 129.5% on average over the last four quarters [14]. - **T-Mobile**: A leading national wireless service provider, T-Mobile has achieved record-low churn rates and significant postpaid customer growth, supported by its Ultra Capacity 5G network. The stock has gained 37.1% over the past year with a long-term earnings growth expectation of 17.2% [17]. - **Verizon**: As a full-service wireless carrier, Verizon is expanding its fiber-optic networks and deploying advanced technologies to enhance data speeds. The stock has gained 5.5% over the past year and maintains a strong operational focus [20].

Core Viewpoint - UnitedHealth Group is undergoing significant leadership changes and strategic reassessments following a substantial decline in stock performance and regulatory scrutiny, particularly in its Medicare practices [1][2][3]. Group 1: Leadership Changes - UnitedHealth Group re-elected all current directors and appointed Stephen Hemsley as the new CEO after Andrew Witty's resignation [1]. - Hemsley acknowledged the company's recent performance issues and committed to a comprehensive review of controversial practices [4]. Group 2: Financial Performance - The company authorized a cash dividend increase to $2.21 per share, up from $2.10, to be paid on June 24 [1]. - Year-to-date, UnitedHealth's stock has dropped nearly 40%, primarily due to disappointing fourth-quarter 2024 earnings [2]. Group 3: Medicare Strategy and Regulatory Scrutiny - Under Witty, UnitedHealth's aggressive growth strategy in Medicare Advantage faced increased regulatory scrutiny and rising costs [3]. - The company plans to enlist independent experts to review its Medicare billing practices following criticism from a Wall Street Journal investigation [3]. - Hemsley indicated that the company would factor recent results into its 2025 Medicare bids and adopt a "fresh perspective" on criticized issues [5]. Group 4: Impact of Regulatory Changes - Changes announced by the Medicare agency in 2023 are expected to significantly reduce reimbursements for nearly 900,000 patients, impacting UnitedHealth's financial outlook [6][7]. - Despite these challenges, UnitedHealth continues to pursue growth in Medicare, particularly in high-risk patient segments, while competitors have scaled back [7]. Group 5: Internal Review and Future Directions - Hemsley stated that the company would also review its pharmacy services and managed care policies, including prior authorization processes that have faced criticism [8].

Core Insights - NIKE Inc. (NKE) is a leader in digital athleticwear sales, holding a top-three position globally and reaching consumers in nearly 190 countries, with digital transformation as a key part of its turnaround strategy [1][4] - The company is focusing on direct-to-consumer (DTC) models, data analytics, and AI-driven personalization to enhance customer experience and reposition NIKE Digital as a premium channel [2][4] - Despite a strategic reset leading to expected declines in digital revenues in the near term, NIKE aims to regain brand strength and margin expansion through reduced promotions and improved storytelling [3][4] Digital Strategy - NIKE's digital sales fell 15% year-over-year in Q3 fiscal 2025, contributing to a 10% drop in overall DTC revenues, attributed to a significant reduction in promotional activities [4][9] - The company is implementing initiatives like "zero promotional days" in North America to transform its digital channel into a full-price, premium experience [2][4] - Digital sales still represent about 40% of NIKE's total global revenues, highlighting its strategic importance [4][9] Competitive Landscape - Major competitors in the digital space include lululemon athletica inc. and adidas AG, both of which have strong digital presences and are expanding their market shares [6][8] - lululemon's digital business accounts for over 40% of its total revenues, focusing on personalized shopping experiences and community engagement [7] - adidas aims to increase its digital sales to 50% of total sales by 2025, leveraging personalized shopping and loyalty programs [8] Financial Performance - NIKE shares have declined approximately 16.3% year-to-date, contrasting with the industry's growth of 16% [11] - The forward price-to-earnings ratio for NIKE is 29.33X, higher than the industry average of 20.78X, indicating a premium valuation [13] - Earnings estimates for fiscal 2025 and 2026 suggest a year-over-year decline of 46.1% and 8.7%, respectively, with recent adjustments in EPS estimates reflecting market conditions [14][15]

Core Insights - Rivian Automotive, Inc. is implementing a new over-the-air software update that introduces manual preconditioning for high-voltage batteries for DC fast charging on R1S and R1T models, enhancing user control over battery management [1][9] - The software version 2025.18 features a redesigned Energy App with an Energy Monitor for detailed energy consumption insights and a Charging Tab that provides smart reminders for unplugging during long trips [2][9] - Charging speeds for certain R1S and R1T models have been improved, with Gen 2 vehicles now capable of reaching a peak charging rate of 215 kW, resulting in shorter charging times for 10-80% top-ups [3][9] Competitive Landscape - Rivian's updates, while not groundbreaking compared to Tesla's existing features, demonstrate the company's commitment to enhancing the electric vehicle user experience [4] - Tesla has expanded its Supercharger network significantly, adding over 10,000 new stalls and growing its global network by 19% year-over-year, delivering more than 5.2 terawatt-hours of energy [5] - Volkswagen Group is rapidly expanding its electric vehicle charging infrastructure through subsidiaries and partnerships, including a collaboration with XPeng to build super-fast charging networks in China [6] Financial Performance - Rivian has outperformed the Zacks Automotive-Domestic industry year-to-date, with RIVN shares gaining 8% compared to the industry's decline of 14.8% [7] - Rivian appears undervalued with a forward price/sales ratio of 2.58, lower than the industry's 2.75 [11] - The Zacks Consensus Estimate for Rivian's EPS has increased by 42 cents for 2025 and 15 cents for 2026 over the past 30 days [12]

Core Viewpoint - The recommendation for Gerdau S.A. (NYSE: GGB) shares has been raised from hold to buy, indicating a positive outlook for the company's stock performance [1]. Company Summary - Gerdau S.A. is being analyzed based on over 5 years of experience in equity analysis in Latin America, suggesting a strong foundation for the investment recommendation [1].