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What's in the Offing for Vornado (VNO) This Earnings Season?
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Vornado Realty Trust (VNO - Free Report) is scheduled to report third-quarter 2022 results on Oct 31, after the closing bell. The quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this New York-based real estate investment trust’s (REIT) FFO plus assumed conversions, as adjusted, surpassed the Zacks Consensus Estimate by 5.06%. The quarterly results reflected better-than-anticipated top-line growth. The same-store net operating income (NOI) improved across its portfolio.
Over the trailing four quarters, Vornado surpassed the Zacks Consensus Estimate on three occasions and missed the mark in one, the average beat being 4.27%. This is depicted in the graph below.
Per a Cushman & Wakefield (CWK - Free Report) report, the United States office market’s overall absorption continued to be negative even though office-using employment increased in the first three quarters of this year. Notably, on a four-quarter moving average basis, in third-quarter 2022, the U.S. office sector’s overall net absorption improved from negative 26 million square feet (msf) to negative 5.9 msf year over year.
However, gross leasing activity has rebounded from its lows in first-quarter 2021. The four-quarter rolling total leasing has increased 45%. Also, third-quarter 2022 marked the third consecutive quarter wherein the four-quarter rolling total leasing was more than 350 msf.
Vornado has a portfolio of premium assets in a few select high-rent, high-barrier-to-entry markets of New York, San Francisco and Chicago. We believe that the improving leasing scenario in the U. S. office real-estate market and the return-to-office policy implemented by many companies are likely to have driven the company’s rental revenues during the third quarter.
Also, with consumers’ increased preference for in-person shopping experience, the retail market is experiencing a rebound. This is likely to have aided the company’s Manhattan’s street retail performance during the to-be-reported quarter.
The Zacks Consensus Estimate for third-quarter revenues is pegged at $432.7 million, suggesting 5.8% growth from the year-ago quarter’s reported figure.
Per the Cushman & Wakefield report, vacancy at the national level was 17.8% as of the third-quarter end. For VNO, the rising supply of office properties is anticipated to have limited its ability to achieve high leasing potential in the third quarter.
Further, in all likelihood, we expect the company to report higher interest expenses in the quarter on the back of rising interest rates. Higher rates might have also limited the company’s ability to purchase or develop real estate.
VNO’s activities during the third quarter were not adequate to secure analyst confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been unchanged at 74 cents over the past month. Nonetheless, the same suggests a 4.2% increase from the prior-year period’s reported number.
Earnings Whispers
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for VNO this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.
Earnings ESP: Vornado has an Earnings ESP of -0.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here are some other stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:
Public Storage (PSA - Free Report) is slated to report quarterly numbers on Nov 1. PSA has an Earnings ESP of +1.34% and carries a Zacks Rank of 3.
Host Hotels & Resorts (HST - Free Report) is scheduled to report quarterly figures on Nov 2. HST has an Earnings ESP of +0.71% and a Zacks Rank of 3 currently.
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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What's in the Offing for Vornado (VNO) This Earnings Season?
Vornado Realty Trust (VNO - Free Report) is scheduled to report third-quarter 2022 results on Oct 31, after the closing bell. The quarterly results are likely to reflect growth in revenues and funds from operations (FFO) per share.
In the last reported quarter, this New York-based real estate investment trust’s (REIT) FFO plus assumed conversions, as adjusted, surpassed the Zacks Consensus Estimate by 5.06%. The quarterly results reflected better-than-anticipated top-line growth. The same-store net operating income (NOI) improved across its portfolio.
Over the trailing four quarters, Vornado surpassed the Zacks Consensus Estimate on three occasions and missed the mark in one, the average beat being 4.27%. This is depicted in the graph below.
Vornado Realty Trust Price and EPS Surprise
Vornado Realty Trust price-eps-surprise | Vornado Realty Trust Quote
Factors at Play
Per a Cushman & Wakefield (CWK - Free Report) report, the United States office market’s overall absorption continued to be negative even though office-using employment increased in the first three quarters of this year. Notably, on a four-quarter moving average basis, in third-quarter 2022, the U.S. office sector’s overall net absorption improved from negative 26 million square feet (msf) to negative 5.9 msf year over year.
However, gross leasing activity has rebounded from its lows in first-quarter 2021. The four-quarter rolling total leasing has increased 45%. Also, third-quarter 2022 marked the third consecutive quarter wherein the four-quarter rolling total leasing was more than 350 msf.
Vornado has a portfolio of premium assets in a few select high-rent, high-barrier-to-entry markets of New York, San Francisco and Chicago. We believe that the improving leasing scenario in the U. S. office real-estate market and the return-to-office policy implemented by many companies are likely to have driven the company’s rental revenues during the third quarter.
Also, with consumers’ increased preference for in-person shopping experience, the retail market is experiencing a rebound. This is likely to have aided the company’s Manhattan’s street retail performance during the to-be-reported quarter.
The Zacks Consensus Estimate for third-quarter revenues is pegged at $432.7 million, suggesting 5.8% growth from the year-ago quarter’s reported figure.
Per the Cushman & Wakefield report, vacancy at the national level was 17.8% as of the third-quarter end. For VNO, the rising supply of office properties is anticipated to have limited its ability to achieve high leasing potential in the third quarter.
Further, in all likelihood, we expect the company to report higher interest expenses in the quarter on the back of rising interest rates. Higher rates might have also limited the company’s ability to purchase or develop real estate.
VNO’s activities during the third quarter were not adequate to secure analyst confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been unchanged at 74 cents over the past month. Nonetheless, the same suggests a 4.2% increase from the prior-year period’s reported number.
Earnings Whispers
Our proven model does not conclusively predict a positive surprise in terms of FFO per share for VNO this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.
Earnings ESP: Vornado has an Earnings ESP of -0.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Vornado currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.
Stocks That Warrant a Look
Here are some other stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:
Public Storage (PSA - Free Report) is slated to report quarterly numbers on Nov 1. PSA has an Earnings ESP of +1.34% and carries a Zacks Rank of 3.
Host Hotels & Resorts (HST - Free Report) is scheduled to report quarterly figures on Nov 2. HST has an Earnings ESP of +0.71% and a Zacks Rank of 3 currently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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.