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Why Is SL Green (SLG) Down 6.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for SL Green (SLG - Free Report) . Shares have lost about 6.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is SL Green 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 drivers.

SL Green Q2 FFO Misses Estimates, Occupancy and NOI Decline

SL Green delivered second-quarter 2021 FFO per share of $1.60, missing the Zacks Consensus Estimate of $1.62. The reported figure compared unfavorably with the year-ago quarter’s $1.70.

Decline in occupancy level and same-store cash NOI hurt the company’s performance in the reported quarter.

While net rental revenues of $163.9 million in the second quarter surpassed the Zacks Consensus Estimate of $152 million, the figure declined 5.9% from the prior-year quarter’s $174.1 million.

Quarter in Detail

In the second quarter, same-store cash NOI, including SL Green’s share of same-store cash NOI from unconsolidated joint ventures, decreased 3.7% year over year. This excludes lease termination income.

In the Manhattan portfolio, the company signed 42 office leases for 557,703 square feet in the reported period. The mark-to-market on signed Manhattan office leases edged down 1.1% from the previous fully-escalated rents on the same spaces.

For the Manhattan office leases signed in second-quarter 2021, the average lease term was 4.7 years, while average tenant concessions were 2.4 months of free rent with a tenant improvement allowance of $17.16 per rentable square foot. This excludes the leases signed at One Vanderbilt Avenue.

As of Jun 30, 2021, Manhattan’s same-store office occupancy, inclusive of leases signed but not yet commenced, was 93.6%, having shrunk 50 basis points from the prior quarter.

The carrying value of its debt and preferred equity portfolio was $1.11 billion as of Jun 30, 2021.

Liquidity

The company exited second-quarter 2021 with cash and cash equivalents of $218.3 million, down from the $304.9 million recorded at the end of the first quarter.

Investment Activity

Under its $3.5-billion share-repurchase program, SL Green has repurchased 3.4 million shares since the beginning of this year through Jul 21, 2021.

In the second quarter, it closed on the proposed sale of its 20% stake in luxury multifamily tower — Sky — located at 605 West 42nd Street for net cash proceeds of $54.5 million.

The company also completed the sale of its property in 635-641 Sixth Avenue, generating net cash proceeds of $313.2 million.

In addition to that, it completed the buyout of fee interest in 461 Fifth Avenue for a gross purchase price of $28 million.

Dividends

During the second quarter, SL Green paid out three monthly dividends of 30.33 cents per share on its common stock in May, June and July, equating to an annualized dividend of $3.64 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, SL Green has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, 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 C. 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. Notably, SL Green has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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