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Why Is Vornado (VNO) Up 1.7% Since Last Earnings Report?

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A month has gone by since the last earnings report for Vornado (VNO - Free Report) . Shares have added about 1.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Vornado due for a pullback? 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 Q1 FFO Misses Estimates, Revenues Surpass

Vornado reported first-quarter 2020 FFO plus assumed conversions as adjusted of 72 cents per share, missing the Zacks Consensus Estimate of 76 cents. The reported figure declined 8.9% year over year.

Total same-store NOI in the New York portfolio as well as at theMART impacted the company’s performance in the first quarter.

Total revenues were $444.5 million in the reported quarter, outpacing the Zacks Consensus Estimate of $429.7 million. However, the revenue figure compared unfavorably with the year-ago number of $534.7 million.

Behind the Headline Numbers

In the New York portfolio, 311,000 square feet of office space (297,000 square feet of space at share) and 15,000 square feet of retail space (13,000 square feet of space at share) were leased during the March-end quarter. Also, 231,000 square feet of area was leased at theMart and 6,000 square feet of space was leased at 555 California Street (4,000 square feet at share).

At the end of the first quarter, occupancy in the New York portfolio was 96.7%, flat sequentially, and expanding 70 basis points (bps) year over year. Occupancy in theMART was 91.9%, down 270 bps sequentially and 250 bps year over year. Furthermore, occupancy in 555 California Street was 99.8%, flat sequentially but up 40 bps year over year.

During the reported period, total same-store NOI decreased 2.5% year over year. In fact, same-store NOI in the company’s 555 California Street improved 5.6%. The same at theMART and New York portfolio declined 13.3% and 1.9%, respectively. Amid the coronavirus pandemic, the company had to temporarily close its Hotel Pennsylvania and cancel trade shows, resulting in a same-store NOI decline in the New York portfolio and at theMART, respectively.

During the January-March period, Vornado closed the sale of seven condominium units at 220 CPS for net proceeds amounting to $191.2 million. This resulted in a financial statement net gain of $68.6 million.

As of Mar 31, 2020, Vornado had $1.59 million of cash and cash equivalents, up from the $1.51 million reported as of the prior-year end.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -14.73% due to these changes.

VGM Scores

Currently, Vornado has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 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 #4 (Sell). We expect a below average return from the stock in the next few months.


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