A month has gone by since the last earnings report for Vornado (VNO). Shares have lost about 8.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Vornado 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 catalysts.
Vornado's Q2 FFO Miss Estimates on Lower Occupancy
Vornado reported second-quarter 2019 FFO plus assumed conversions, as adjusted of 91 cents per share, missing the Zacks Consensus Estimate of 94 cents. Also, the reported figure compares unfavorably with the year-ago tally of 98 cents.
The decline in FFO as adjusted was attributed to 4 cents per share of non-cash write-off of straight-line rent receivables and 3 cents per share of non-cash expense for the time-based equity compensation granted in relation to the previously-announced new leadership group.
The company exited the quarter with lower year-over-year occupancy across all its portfolios. Further, a decline in the New York portfolio’s same-store net operating income (NOI) affected results.
Total revenues came in at $463.1 million in the reported quarter, missing the Zacks Consensus Estimate of $542.5 million. Further, the revenue figure compares unfavorably with the year-ago tally of $541.8 million.
Behind the Headline Numbers
In the New York portfolio, 221,000 square feet of office space (155,000 square feet of space at share) and 70,000 square feet of retail space (67,000 square feet of space at share) were leased during the June-end quarter. Also, 30,000 square feet of area was leased in theMart and 30,000 square feet was leased at 555 California Street (21,000 square feet at share).
At the end of the second quarter, occupancy in the New York portfolio was 96.5%, shrinking 50 basis points (bps) sequentially, and 10 bps year over year. Occupancy in theMART was 94.8%, down 10 bps sequentially and 450 bps year over year. Furthermore, occupancy in 555 California Street was 99.5%, improving 10 bps sequentially but contracting 220 bps year over year.
During the second quarter, total same-store NOI inched up 1.2% year over year. In fact, same-store NOI at the company’s share edged down 0.7% year over year for the New York portfolio. The same for theMART and 555 California Street grew 12.1% and 13%, year over year, respectively.
As of Jun 30, 2019, Vornado had nearly $922.6 million of cash and cash equivalents, up from $570.9 million as of the prior-year end.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Vornado has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile 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
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Vornado has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Vornado Realty Trust (NYSE:VNO
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