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Vornado (VNO) Q2 Earnings: What's in Store for the Stock?

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Real estate investment trust (“REIT”) Vornado Realty Trust (VNO - Free Report) is expected to report second-quarter 2016 results on Aug 1, after the market closes.

Last quarter, Vornado reported a negative surprise of 13.01%. In the trailing four quarters, the company met estimates in one, recorded positive surprises in two and reported a miss in the other. The average beat for the last four quarters was a positive 7.77%. For second-quarter 2016, funds from operation (“FFO”) is currently pegged at $1.25 per share.

Let’s see how things have shaped up for this announcement.

Factors to Consider

Vornado’s Class A office properties, concentrated over a few select high barrier-to-entry geographic markets offer the company huge growth prospects.  The New York portfolio is performing well, driven by improved office market fundamentals and robust leasing activity. Moreover, Vornado’s ongoing investment activities during the quarter are anticipated to drive higher returns compared to its capital costs, thereby promising attractive yield for investors.
 
As part of its portfolio-repositioning efforts, the company is aggressively disposing its assets. Though such efforts of Vornado to streamline its business are commendable, the earnings dilutive effects of these moves can’t be denied.

Earnings Whispers

Our proven model does not conclusively show that Vornado will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Most Accurate Estimate and the Zacks Consensus Estimate currently stand at $1.22 and $1.25, respectively, which translate into an Earnings ESP of -2.40%.

Zacks Rank: Vornado’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP as well to be confident about an earnings beat.

Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

VORNADO RLTY TR Price and EPS Surprise

VORNADO RLTY TR Price and EPS Surprise | VORNADO RLTY TR Quote

Stocks to Consider

Here are a few stocks in the real estate investment trust sector you may want to consider, as our model shows that they have the right combination of elements to post a positive surprise this quarter:

Sun Communities Inc. (SUI - Free Report) has an Earnings ESP of +2.44% and a Zacks Rank #2. The company will report results on Aug 2.

Regency Centers Corporation (REG - Free Report) has an Earnings ESP of +1.25% and a Zacks Rank #3. The company will release results on Aug 2.

National Health Investors Inc. (NHI - Free Report) has an Earnings ESP of +0.83% and a Zacks Rank #2. The company will report results on Aug 5.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All earnings per share numbers presented in this write up represent FFO per share.

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