Back to top

Image: Bigstock

Here's Why You Should Retain Vornado (VNO) Stock for Now

Read MoreHide Full Article

Vornado Realty Trust (VNO - Free Report) , with high-quality assets, is well-poised to benefit from an improving office leasing market. However, intense competition from developers, owners and operators of office properties poses a challenge to its office assets.

The focus on having assets in a few select high-rent, high-barrier-to-entry geographic markets and a diversified tenant base, which includes several industry bellwethers, are expected to drive steady cash flows and fuel Vornado’s growth over the long term. Recently, Vornado entered into a 20-year lease agreement with Madison Square Garden Entertainment for 428,000 square feet at Vornado’s PENN 2.

Additionally, Vornado enjoys a strong balance sheet position and has ample liquidly. As of Sep 30, 2021, VNO had $4.5 billion of liquidity, consisting of $2.3 billion cash and cash equivalents. Such a flexible financial position will enable it to take advantage of investment opportunities and fund its development projects.

Shares of currently Zacks Rank #3 (Hold) Vornado have appreciated 9.2% in three months, outperforming the industry’s growth of 1.6%. Moreover, the trend in estimate revisions for 2021 funds from operations (FFO) per share indicates a favorable outlook for VNOas the same has moved 2% north in the past two months.

Zacks Investment ResearchImage Source: Zacks Investment Research

However, Vornado faces fierce competition from developers, owners and operators of office properties and other commercial real estates. This downtrend affects VNO’s ability to attract and retain tenants at relatively higher rents than its competitors, affecting its profitability.

Moreover, Vornado’s retail portfolio is suffering the rapid shift in customers’ shopping preferences and patterns, with online purchases growing by leaps and bounds. These made retailers reconsider their footprint and eventually opt for store closures. Additionally, retailers unable to cope with the competition are filing for bankruptcies. Such a situation emerged as a pressing concern for VNO as the trend is curtailing leasing velocity for the retail real-estate space and lowering absorption and rents.

Key Picks

Some better-ranked stocks from the REIT sector are Cedar Realty Trust (CDR - Free Report) , Alpine Income Property Trust (PINE - Free Report) and Apple Hospitality REIT (APLE - Free Report) .

The Zacks Consensus Estimate for Cedar Realty Trust’s 2021 FFO per share has been raised 2.6% in the past week.

Cedar Realty Trust currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Alpine Income Property Trust’s ongoing year’s FFO per share has been raised 2.1% over the past month.

Alpine Income Property Trust carries a Zacks Rank #2 (Buy), currently.

The Zacks Consensus Estimate for Apple Hospitality REIT’s2021 FFO per share has moved 4.9% upward in the past month.

Apple Hospitality REIT currently carries a Zacks Rank of 2.

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