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What to Expect From Vornado (VNO) This Earnings Season?
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Vornado Realty Trust (VNO - Free Report) is scheduled to report fourth-quarter and 2020 results on Feb 20, after the closing bell. Results are projected to display year-over-year declines in revenues and funds from operations (FFO) per share.
In the last reported quarter, this New York-based real estate investment trust (REIT) missed the Zacks Consensus Estimate by 7.8% in terms of FFO per share plus assumed conversions as adjusted. A decline in same-store net operating income (NOI) in the New York portfolio and theMART affected the company’s quarterly results.
Over the preceding four quarters, Vornado surpassed the Zacks Consensus Estimate on one occasion and missed in the other three, the average negative surprise being 7.88%. This is depicted in the graph below:
Let’s see how things have shaped up for this announcement.
The pandemic and its adverse impacts on the demand for office and street retail, especially in New York City are expected to have hindered Vornado’s performance in the fourth quarter.
Specifically, the retail real estate market had already been battling dwindling traffic issues, store closures and retailer bankruptcies, and the pandemic has further aggravated its woes. Notably, per a report from CBRE Group, the total retail availability rate remained sequentially unchanged at 6.6% in the fourth quarter but expanded 40 basis points year over year, thanks to the pandemic.Moreover, rates have varied widely in terms of geography, with the sub-urban areas and tier-II cities outperforming higher-density urban areas.
The company’s office portfolio is also not expected to have offered support. In fact, office occupiers continued to shed their space in fourth-quarter 2020. The decline in demand along with increased supply led to a notable surge in vacancy rates and affected net absorption.
Specifically, going by a Cushman & Wakefield report, net absorption aggregated negative 43 million square feet, marking the third consecutive quarter of negative absorption. Further, vacancy increased to 15.5% in the December-end quarter from 14.4% in the third quarter. This was the largest vacancy increase in a quarter since first-quarter 2002.
Such a lackluster environment is expected to have led to occupancy loss at the company’s office properties in the quarter under review. Moreover, amid the pandemic, the shutdown of Hotel Pennsylvania is expected to have led to a NOI decline in its New York City segment. Notably, New York City revenues are anticipated to decline 22% year over year to $295 million in the December-end quarter.
Also, the Zacks Consensus Estimate for rentals for the company’s New York properties (accounting for 87% of NOI in the third quarter) was pinned at $229 million. This indicates a year-over-year decline of 21.3%.
Moreover, trade show cancellations are likely to have affected revenues and NOI at the MART.
Further, the Zacks Consensus Estimate for fourth-quarter revenues is pinned at $362.8 million, suggesting a year-over-year decline of 21.3%.
Also, amid the pandemic-led disruptions in businesses, the financial condition and liquidity of the company’s office and retail tenants have been impaired, affecting their ability to pay rents. This has likely compelled the company to write off such uncollectible rents, thereby, hampering lease revenues. In fact, Vornado has written off $12,364,000 of tenant receivables deemed uncollectible for the September-end quarter and this is expected to have continued in the fourth quarter as well.
Nonetheless, the company will register an after-tax net gain on sale of $36.3 million for the sale of condominium units at its residential construction project — 220 Central Park South. Vornado expects this to improve FFO plus assumed conversions by 18 cents per share for fourth-quarter 2020.
However, severance and other reduction-in-force-related expenses are expected to reduce FFO plus assumed conversions by $23.4 million or 12 cents per share. This is likely to have hindered FFO growth for the quarter. In fact, prior to the fourth-quarter earnings release, the Zacks Consensus Estimate for fourth-quarter FFO per share is pinned at 64 cents, suggesting a decline of 28.1% from the year-ago reported figure.
Earnings Whispers
Our proven model cannot conclusively predict a beat in terms of FFO per share for Vornado this time around. The combination of a positive Earnings ESP and Zacks Rank #3 (Hold) or better increases the odds of a FFO beat. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Vornado has an Earnings ESP of +7.81%.
Zacks Rank: The company currently carries a Zacks Rank of 5 (Strong Sell).
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a beat this quarter:
Hudson Pacific Properties, Inc. (HPP - Free Report) , slated to release quarterly earnings on Feb 17, currently has an Earnings ESP of +0.76% and a Zacks Rank of 2 (Buy).
Public Storage (PSA - Free Report) , scheduled to announce fourth-quarter results on Feb 24, has an Earnings ESP of +0.53% and a Zacks Rank of 3 at present.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
Image: Bigstock
What to Expect From Vornado (VNO) This Earnings Season?
Vornado Realty Trust (VNO - Free Report) is scheduled to report fourth-quarter and 2020 results on Feb 20, after the closing bell. Results are projected to display year-over-year declines in revenues and funds from operations (FFO) per share.
In the last reported quarter, this New York-based real estate investment trust (REIT) missed the Zacks Consensus Estimate by 7.8% in terms of FFO per share plus assumed conversions as adjusted. A decline in same-store net operating income (NOI) in the New York portfolio and theMART affected the company’s quarterly results.
Over the preceding four quarters, Vornado surpassed the Zacks Consensus Estimate on one occasion and missed in the other three, the average negative surprise being 7.88%. This is depicted in the graph below:
Vornado Realty Trust Price and EPS Surprise
Vornado Realty Trust price-eps-surprise | Vornado Realty Trust Quote
Let’s see how things have shaped up for this announcement.
The pandemic and its adverse impacts on the demand for office and street retail, especially in New York City are expected to have hindered Vornado’s performance in the fourth quarter.
Specifically, the retail real estate market had already been battling dwindling traffic issues, store closures and retailer bankruptcies, and the pandemic has further aggravated its woes. Notably, per a report from CBRE Group, the total retail availability rate remained sequentially unchanged at 6.6% in the fourth quarter but expanded 40 basis points year over year, thanks to the pandemic.Moreover, rates have varied widely in terms of geography, with the sub-urban areas and tier-II cities outperforming higher-density urban areas.
The company’s office portfolio is also not expected to have offered support. In fact, office occupiers continued to shed their space in fourth-quarter 2020. The decline in demand along with increased supply led to a notable surge in vacancy rates and affected net absorption.
Specifically, going by a Cushman & Wakefield report, net absorption aggregated negative 43 million square feet, marking the third consecutive quarter of negative absorption. Further, vacancy increased to 15.5% in the December-end quarter from 14.4% in the third quarter. This was the largest vacancy increase in a quarter since first-quarter 2002.
Such a lackluster environment is expected to have led to occupancy loss at the company’s office properties in the quarter under review. Moreover, amid the pandemic, the shutdown of Hotel Pennsylvania is expected to have led to a NOI decline in its New York City segment. Notably, New York City revenues are anticipated to decline 22% year over year to $295 million in the December-end quarter.
Also, the Zacks Consensus Estimate for rentals for the company’s New York properties (accounting for 87% of NOI in the third quarter) was pinned at $229 million. This indicates a year-over-year decline of 21.3%.
Moreover, trade show cancellations are likely to have affected revenues and NOI at the MART.
Further, the Zacks Consensus Estimate for fourth-quarter revenues is pinned at $362.8 million, suggesting a year-over-year decline of 21.3%.
Also, amid the pandemic-led disruptions in businesses, the financial condition and liquidity of the company’s office and retail tenants have been impaired, affecting their ability to pay rents. This has likely compelled the company to write off such uncollectible rents, thereby, hampering lease revenues. In fact, Vornado has written off $12,364,000 of tenant receivables deemed uncollectible for the September-end quarter and this is expected to have continued in the fourth quarter as well.
Nonetheless, the company will register an after-tax net gain on sale of $36.3 million for the sale of condominium units at its residential construction project — 220 Central Park South. Vornado expects this to improve FFO plus assumed conversions by 18 cents per share for fourth-quarter 2020.
However, severance and other reduction-in-force-related expenses are expected to reduce FFO plus assumed conversions by $23.4 million or 12 cents per share. This is likely to have hindered FFO growth for the quarter. In fact, prior to the fourth-quarter earnings release, the Zacks Consensus Estimate for fourth-quarter FFO per share is pinned at 64 cents, suggesting a decline of 28.1% from the year-ago reported figure.
Earnings Whispers
Our proven model cannot conclusively predict a beat in terms of FFO per share for Vornado this time around. The combination of a positive Earnings ESP and Zacks Rank #3 (Hold) or better increases the odds of a FFO beat. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Vornado has an Earnings ESP of +7.81%.
Zacks Rank: The company currently carries a Zacks Rank of 5 (Strong Sell).
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a beat this quarter:
American Tower Corporation (AMT - Free Report) , set to report quarterly numbers on Feb 25, currently has an Earnings ESP of +7.49% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hudson Pacific Properties, Inc. (HPP - Free Report) , slated to release quarterly earnings on Feb 17, currently has an Earnings ESP of +0.76% and a Zacks Rank of 2 (Buy).
Public Storage (PSA - Free Report) , scheduled to announce fourth-quarter results on Feb 24, has an Earnings ESP of +0.53% and a Zacks Rank of 3 at present.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>