This ASX 200 real estate stock has been flying ahead of tomorrow's key update. Should you buy?

This stock is making impressive progress. Is it a buy?

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The Goodman Group (ASX: GMG) share price has risen almost 5% this week and around 8% this month, as we can see on the chart below. In this article, I'm going to look at whether the S&P/ASX 200 Index (ASX: XJO) stock is a buy.

Goodman is a large owner and developer of industrial property in Australia and overseas. The business is now putting a lot of effort into growing its exposure to data centres. With Goodman expected to release its FY24 third quarter operational update tomorrow, is now a good time to think about the ASX 200 stock?

Strong update expected

The Australian reported on recent commentary from broker Citi, which suggested there is going to be improved earnings guidance when the update is released.

Citi analyst Howard Penny believes there could be good news on the data centre rollout and potential for an earnings upgrade from Goodman's investor update.

Citi suggested there could be a positive market response to the Goodman share price if the guidance is hiked.

What progress has Goodman revealed about data centres?

When Goodman announced its FY24 first-half result, it said the data centre global power bank had expanded to 4GW across 12 major global cities.

The ASX 200 stock said its secured power increased to 2.1GW with another 1.9GW in the advanced stages of procurement. These new data centres will require large amounts of energy to power them.

Goodman explained it is gaining planning approvals and starting infrastructure works across the power bank to provide customers with certainty on project milestones.

It also said it's continuing to work with customers on delivery and leasing models for powered shell and turn-key solutions, utilising Goodman's planning, architectural and engineering capabilities, and strong balance sheet.

Is the Goodman share price a buy?

The Goodman share price has railed strongly, so it's certainly not as good value as it was a few months ago.

But, numerous financial measures are moving in the right direction. In the HY24 result it upgraded its operating earnings per share (EPS) guidance to 11% growth, up from the previous guidance of 9% growth.

The ASX 200 stock said it's executing on its high-quality development workbook with attractive project margins. At the latest disclosure, the business had work in progress (WIP) of $12.9 billion.

Goodman also said its investment property is "performing strongly with high levels of occupancy and income growth". In the HY24 result, Goodman reported a portfolio occupancy rate of 98.4%, while the 12-month rolling like-for-like net property income growth was 5%, which I think is a solid growth rate.

If Goodman keeps delivering good underlying growth, it can continue to justify a higher Goodman share price. We'll see how the market reacts tomorrow, but the long-term looks promising.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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