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Why Is Vornado (VNO) Up 30.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Vornado (VNO - Free Report) . Shares have added about 30.4% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Vornado Q4 FFO Tops, Revenues Dip on Lower Occupancy

Vornado reported fourth-quarter 2020 FFO plus assumed conversions as adjusted of 66 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. The reported figure, however, plunged 34.8% year over year.

While lower interest expenses aided the bottom line, a decline in same-store NOI in the New York portfolio and theMART affected the company’s quarterly results.

Total revenues were $376.4 million in the reported quarter, outpacing the Zacks Consensus Estimate of $362.8 million. However, the revenue figure compares unfavorably with the year-ago number of $460.9 million.

For the reported quarter, the company collected 95% of the rent, excluding deferrals. This comprised collections of 97% from its office tenants and 88% from retail tenants.

For 2020, the company reported FFO plus assumed conversions as adjusted of $2.53 per share, down 27.5% from the prior year’s $3.49. The reported figure, nonetheless, outpaced the Zacks Consensus Estimate of $2.51. Total revenues of $1.52 billion decreased 20.6% year over year.

Same-store NOI for 2020 decreased 13.8% from the year-ago period.

Behind the Headline Numbers

In the New York portfolio, 163,000 square feet of office space (144,000 square feet of space at share) and 175,000 square feet of retail space (125,000 square feet at share) were leased during the December-end quarter. Also, 62,000 square feet of area (all at share) was leased at theMart and 271,000 square feet of space was leased at 555 California Street (190,000 square feet at share).

At the end of the fourth quarter, occupancy in the New York portfolio was 92.1%, which shrunk 460 basis points (bps) year over year. Occupancy in theMART was 89.5%, down 510 bps year over year. Furthermore, occupancy in 555 California Street was 98.4%, down 140 bps year over year.

Moreover, during the reported quarter, total same-store NOI decreased 11.3% year over year. Same-store NOI in the company’s 555 California Street inched up 0.2%. However, same-store NOI at theMART and the New York portfolio declined 24.2% and 10.8%, respectively.

In the fourth quarter, Vornado closed the sale of five condominium units at 220 CPS for net proceeds of $110.06 million. This resulted in a financial statement net gain of $42.4 million.

As of Dec 31, 2020, the company had $1.62 billion of cash and cash equivalents, up from $1.52 billion reported as of Dec 31, 2019.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 10.24% due to these changes.

VGM Scores

At this time, Vornado has a subpar Growth Score of D, however its Momentum Score 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Vornado has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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