Back to top

Image: Bigstock

Why Is Mack-Cali (CLI) Down 9.2% Since the Last Earnings Report?

Read MoreHide Full Article

It has been about a month since the last earnings report for Mack-Cali Realty Corporation . Shares have lost about 9.2% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock’s next earnings release, or is it 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 Q4 FFO Beats Estimates, Reaffirms Outlook

Mack-Cali reported fourth-quarter 2016 core FFO per share of $0.56, beating the Zacks Consensus Estimate by a penny. It was also up 19.1% from the prior-year quarter tally of $0.47.

The better-than-expected result at Mack-Cali was supported by increased base rents in 2016.

Moreover, total revenue registered growth of 5.0% year over year to $153.7 million and exceeded the Zacks Consensus Estimate of $150.2 million.

Quarter in Detail

During the quarter, Mack-Cali executed 55 lease deals, spanning around 0.3 million square feet, at its consolidated in-service commercial portfolio. This comprised 45% for new leases, and 55% for lease renewals and other tenant-retention deals.

As of Dec 31, 2016, Mack-Cali’s consolidated Core, Waterfront and Flex properties were 90.6% leased, up 30 basis points (bps) sequentially and 150 bps year over year.

Further, rental rate roll up for the fourth-quarter transactions in the company’s Core, Waterfront and Flex properties was 3.5% on a cash basis and 12.2% on a GAAP basis.

Liquidity

Mack-Cali exited fourth-quarter 2016 with cash and cash equivalents of $31.6 million, down from $37.1 million recorded at the end of the prior year.

Further, as of Dec 31, 2016, the company had a debt-to-undepreciated assets ratio of 41.6%; while interest coverage ratio was 3.5 times for the fourth quarter.

Portfolio Activity

Notably, Mack-Cali’s office dispositions aggregated $280 million for fourth-quarter 2016 and through year-to-date 2017. Per its plan, the company made a complete exit out of the DC Metro area by selling the seven-building portfolio in Greenbelt, MD. Together with this, the company exited from several Central New Jersey office sub-markets, including Freehold, Roseland, and Cranford. In addition, it sold its subordinated/ minority stakes in several office assets held with Keystone Property Group throughout the Tri-State area.

Guidance

Mack-Cali has reaffirmed its 2017 FFO per share guidance at $2.25–$2.40.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been two upward revisions for the current quarter.

VGM Scores

At this time, Mack-Cali's stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with a 'B'. However, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.

The stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.

Published in