It has been about a month since the last earnings report for Mack-Cali Realty (CLI). Shares have lost about 6.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Mack-Cali due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Mack-Cali's Q2 FFO Misses Estimates on Low Revenues
Mack-Cali’s second-quarter 2019 core FFO per share of 40 cents missed the Zacks Consensus Estimate by a whisker. The figure also compares unfavorably with the year-ago quarter’s reported tally of 45 cents.
Quarterly revenues of $130.5 million missed the Zacks Consensus Estimate of $131 million. The reported figure also came in lower than the prior-year quarter’s $126.6 million.
The company’s results indicate a slowdown in leasing activity at its office and residential portfolio. Further, same-store cash net operating income (NOI) for the office portfolio declined year over year.
Q2 Highlights
As of Jun 30, 2019, Mack-Cali’s consolidated core office properties were 79.8% leased, which shrunk 110 basis points (bps) from the prior-quarter end. Notably, class A suburban portfolio and Suburban portfolios were 92.5% and 79.4% leased as of the June-end quarter, while Waterfront portfolio was 74.7% leased.
Same-store cash revenues for the office portfolio descended 4.3%, while same-store cash NOI was down 7.3% year over year.
During the reported quarter, Mack-Cali executed 18 lease deals spanning around 226,646 square feet, at the company’s consolidated in-service commercial portfolio. This comprised 31.4% for new leases, and 68.6% for lease renewals and other tenant-retention deals.
In addition, for the core portfolio, rental rate roll up for second-quarter 2019 deals was 8.7% on a cash basis. For new transactions, rental rate roll up was 9.1% on a cash basis, while for renewals and other tenant retention deals, it was 7.6% on a cash basis.
The company’s residential stabilized operating portfolio was 97.7% leased at the end of the quarter. Also, same-store NOI climbed 5.1% in the reported quarter.
Mack-Cali completed purchase of land at 107 Morgan in Jersey City, NJ, for $67 million during the quarter. Moreover, it sold 650 From Rd. in Paramus, NJ, for $42 million.
Guidance
The company narrowed its 2019 core FFO per share guidance to $1.58-$1.66 as compared with $1.57-$1.67 estimated earlier. Additionally, the company projects office occupancy (year-end % leased) of 79-83% and dispositions (excluding flex) of $165-$235 million for the ongoing year.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
At this time, Mack-Cali has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Mack-Cali has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Mack-Cali Realty Corporation (CLI): Free Stock Analysis Report
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