A month has gone by since the last earnings report for SL Green (SLG Quick QuoteSLG - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is SL Green due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

SL Green Q2 FFO Surpasses Estimates, Revenues Miss

SL Green reported second-quarter 2020 FFO per share of $1.70, surpassing the Zacks Consensus Estimate of $1.55. The figure, however, compares unfavorably with the year-ago quarter’s $1.82.

The reported figure includes 4 cents per share of loss related to the sale of certain DPE investments, and 4 cents per share of reserves against the retained DPE portfolio.

Net rental revenues of $174.14 million in the second quarter missed the Zacks Consensus Estimate of $184.26 million. The revenue figure also declined around 20% from the prior-year number of $216.48 million.

As of Jul 22, the company’s gross tenant billings collection for the April-June period was 90.7%. This consisted of 95.7% for office and 69.6% for retail. As of Jul 21, the company’s gross tenant billing receipts for July were 87%, consisting of 91.7% for office and 61.5% for retail. It expects additional collections in the upcoming period.

Quarter in Detail

During the June-end quarter, same-store cash net operating income (NOI), including SL Green’s share of same-store cash NOI from unconsolidated joint ventures, improved 2.1% year over year. This excludes lease termination and free rent income given to Viacom for space at 1515 Broadway.

In the Manhattan portfolio, SL Green signed 35 office leases for 280,002 square feet during the reported period. The average lease term on these leases was 4.3 years, while average tenant concessions were 4.5 months of free rent, along with a tenant improvement allowance of $8.42 per rentable square foot.

The mark-to-market on signed Manhattan office replacement leases was 0.8% lower than the previous fully-escalated rents in the same spaces during the second quarter. As of Jun 30, 2020, Manhattan’s same-store occupancy, inclusive of leases signed but not yet commenced, was 95.2%, down 40 basis points from the prior quarter.

The carrying value of its debt and preferred equity investment portfolio decreased to $1.25 billion.

Liquidity

SL Green exited second-quarter 2020 with cash and cash equivalents of $1.01 billion, up from $166.1 million recorded at the end of 2019.

Investment Activity

Under the $3-billion share-repurchase program, the company has repurchased 6.2 million shares year to date, at an average price of $64.28 per share.

In May, it sold a 49.5% stake in One Madison Avenue to Hines Interest LP and the National Pension Service of Korea ("NPS"). Particularly, NPS and Hines’ committed total equity to the project aggregates no less than $492.2 million. The $2.3-billion project will be developed by SL Green and Hines and will span 1.4 million rentable square feet upon the completion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, SL Green has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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. Notably, SL Green has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.