Vornado Realty Trust ( VNO - Analyst Report ) , a leading real estate investment trust (REIT), reported fiscal 2011 fourth quarter funds from operations (FFO) of $1.46 per share, which well surpassed the Zacks Consensus Estimate of $1.22. Funds from operations, a widely used metric to gauge the performance of REIT, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

We cover below the results of the recent earnings announcement, as well as the subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.

Earnings Report Review

After adjusting items for comparability, FFO during the fourth quarter of 2011 was $220.1 million or $1.15 per share, compared with $218.3 million or $1.15 in the prior-year quarter.

For full year 2011, Vornado reported FFO of $1.23 billion or $6.42 per share, versus $1.25 billion or $6.59 in the previous year. Reported FFO per share for fiscal 2011 exceeded the Zacks Consensus Estimate by 28 cents. Adjusted FFO during the reported fiscal was $1.01 billion or $5.27 per share, compared with $1.00 billion or $5.27 in 2010.

Total revenues during the reported quarter were $741.8 million compared with $702.8 million in the year-ago period. Total revenues during the quarter were well ahead of the Zacks Consensus Estimate of $664 million. For full year 2011, total revenues were $2.9 billion compared with $2.7 billion in the prior year.

(Read our full coverage on this earnings report: VNO's Reported FFO Beats Estimates)

Earnings Estimate Revisions - Overview

Fiscal 2012 earnings estimates have moved down for Vornado Realty since the earnings release, meaning that analysts are bearish about the current fiscal performance of the company. Let’s dig into the earnings estimate details.

Agreement of Estimate Revisions

In the last 7 days, fiscal 2012 earnings estimates were lowered by 7 analysts out of 11 covering the stock, while none had increased the same. For fiscal 2013, only 1 out of 9 analysts covering the stock had revised their estimates upward in the last 7 days, while 2 had lowered it during the same time period. This indicates a clear negative directional movement for the earnings estimates, signifying that the analysts are pessimistic about the fiscal year earnings.

Magnitude of Estimate Revisions

Earnings estimates for fiscal 2012 have dipped by 9 cents in the last 7 days to $5.33. For fiscal 2013, earnings estimates have decreased by 4 cents to $5.42 in the last 7 days, which signifies that although the market fundamentals are gradually improving, they are yet to reach their optimum range to gain sufficient investor confidence over the long-term period.

Moving Forward

The long-term earnings estimate picture for Vornado Realty is neutral. Vornado Realty has office properties in two of the best long-term office markets in the country, New York City and Washington DC. These high-barrier markets have held up comparatively well and have enabled the company to continue increasing rents.

The company also has a strong balance sheet with manageable near-term debt maturities and adequate liquidity to take advantage of distressed selling as asset values of office and retail properties drop in the aftermath of recession.

However, the company’s retail properties and Toy ‘R’ Us investment has suffered in the recent past due to recession, which in turn has negatively affected earnings. Vornado Realty owns about 32.7% of Toys ‘R’ Us – the leading global retailer of dedicated toys and baby products. This undermines the long-term growth potential of the company.

We maintain our Neutral rating on Vornado Realty, which currently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for Brookfield Properties Corporation ( BPO - Snapshot Report ) , one of the competitors of Vornado Realty.

About Earnings Estimate Scorecard

As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/