What happened

Shares of Prologis (PLD 0.69%) were falling today after the world's largest industrial real estate investment trust (REIT) posted second-quarter results that seemed to come up short of Wall Street's expectations, despite beating headline estimates. As of 12:31 p.m. ET, the stock was down 4.4%.

So what

Prologis, which owns warehouses used primarily for logistics and e-commerce, posted results that were mostly in line with estimates, but the stock seemed to fall in response to its elevated valuation. Revenue in the quarter nearly doubled to $2.45 billion, driven in part by last October's acquisition of Duke Realty. That figure easily beat estimates at $1.69 billion.

Earnings per share, meanwhile, jumped from $0.82 to $1.31. This includes $0.58 in earnings per share from its strategic capital segment, which invests in projects overseas. In the quarter a year ago, strategic capital didn't bring in any profit.

Core funds from operations, which is the key bottom-line figure to watch in the REIT sector, rose from $1.11 to $1.83, outpacing the consensus at $1.68.  Average occupancy in the period was 97.5%, and same-store net operating income rose 10.7%, reflecting significant rent increases. 

CEO Hamid Moghadam said, "The continuation of record operating results is a testament to Prologis' premier global portfolio and the enormous, embedded mark-to-market upside that will provide industry-leading, predictable growth for years to come." 

Now what

Looking ahead, Prologis also raised its guidance for the year. The company now sees earnings per share of $3.30-$3.40, up from $3.10-$3.25, and core funds from operations of $5.56-$5.60, up from an earlier range of $5.42-$5.50. 

The numbers in the report were solid and the stock rose in pre-market trading before falling in the regular session. That could be because of valuation concerns and the potential for a slowdown in the industrial real estate sector.

Prologis trades at a high valuation for a REIT, at more than 22 times forward FFO. Other data points to a deceleration in warehouse demand as the industrial vacancy rate rose in June and employment in the sector has fallen sharply since peaking a year ago.

Still, Prologis is the leader in its industry and now has 1.2 billion of square feet. Investors may want to buy the dip on this top-quality REIT.