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Why Is Mack-Cali (CLI) Down 7.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Mack-Cali Realty (CLI - Free Report) . Shares have lost about 7.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mack-Cali 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 catalysts.

Mack-Cali Q2 FFO, Revenues Miss Estimates

Mack-Cali’s second-quarter 2020 core FFO per share of 28 cents missed the Zacks Consensus Estimate of 31 cents. Moreover, the figure compares unfavorably with the year-ago quarter’s reported number of 40 cents.

Leasing activity declined in the company’s office and multi-family portfolios. Moreover, same-store net operating income (NOI) decreased year over year in its multi-family portfolio.

Quarterly revenues of $72.7 million missed the Zacks Consensus Estimate of $118.8 million. The revenue figure also comes in 16.1% lower than the prior-year quarter’s $86.6 million.

In the second quarter, the company collected average office rents of 96% and average residential rents of 98%. Moreover, the company has collected about 98% of its total rent from office tenants and about 99% of its total rent from residential tenants for July.

The company did not issue the ongoing-year outlook due to the pandemic-related uncertainties.

Quarter in Detail

As of Jun 30, 2020, Mack-Cali’s consolidated core office properties were 80.3% leased, reflecting a decrease from 81.1% as of Mar 31, 2020. Notably, the Class A suburban portfolio was leased 89.5%, while Suburban and Waterfront portfolios were leased 77.4% and 78.6%, respectively, as of the same date.

Same-store cash revenues for the office portfolio climbed 4.3% and the same-store cash NOI was up 13.4%, year over year.

During the reported quarter, Mack-Cali executed eight lease deals, spanning 155,054 square feet, in the company’s core office portfolio. This comprised 6.8% for new leases, and 93.2% for lease renewals and other tenant-retention transactions.

In addition, for the core portfolio, rental rate roll up for second-quarter 2020 transactions was 3.4% on a cash basis.

Further, Roseland, its subsidiary engaged in multi-family residential operations, reported that its stabilized operating portfolio was 92.6% leased at the end of the quarter, contracting 310 basis points (bps) from the prior quarter’s end. The multi-family portfolio’s same-store NOI decreased 10.2% for the June-end quarter.

Portfolio Activity

During the second quarter, Mack- Cali contracted to sell 111 River Street, an office building for $244.5 million and this is subject to due diligence.

Balance Sheet Position

The company exited second-quarter 2020 with $26.3 million in cash, up from $25.6 million as of Dec 31, 2019.

Mack-Cali’s net debt to adjusted EBITDA was 13.0X for the reported quarter compared with the prior-year quarter’s 9.5X.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Mack-Cali has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Mack-Cali has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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