A month has gone by since the last earnings report for Vornado (
VNO Quick Quote VNO - Free Report) . Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Vornado due for a breakout? 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’s FFO Misses Estimates in Q1, Revenues Beat
Vornado Realty’s first-quarter 2023 FFO plus assumed conversions as adjusted per share of 60 cents missed the Zacks Consensus Estimate of 62 cents. Moreover, the figure declined 24.1% year over year.
Quarterly results displayed better-than-anticipated revenues aided by healthy leasing activity. However, higher operating expenses acted as a dampener. Total revenues came in at $445.9 million in the reported quarter, surpassing the Zacks Consensus Estimate of $443.7 million. On a year-over-year basis, revenues improved nearly 1%. Quarter in Detail
In the reported quarter, total same-store net operating income (NOI) (at share) came in at $264.6 million compared with the prior-year quarter’s $264.7 million. The metric for the New York and 555 California Street portfolios improved 1.6% and 4.3%, respectively. However, the same-store NOI (at share) for THE MART portfolio declined 22.6% from the prior-year period.
Operating expenses flared up 5.7% to $228.8 million year over year. During the quarter, in the New York office portfolio, 777,000 square feet of office space (771,000 square feet at share) was leased for an initial rent of $101.02 per square foot and a weighted average lease term of 9.5 years. The tenant improvements and leasing commissions were $2.48 per square foot per annum or 2.5% of the initial rent. In the New York retail portfolio, 25,000 square feet were leased (20,000 square feet at share) at an initial rent of $373.07 per square foot and a weighted average lease term of 6.8 years. The tenant improvements and leasing commissions were $26.54 per square foot per annum or 7.1% of the initial rent. Additionally, at THE MART, 79,000 square feet of space (all at share) was leased for an initial rent of $56.44 per square foot and a weighted average lease term of 6.8 years. The tenant improvements and leasing commissions were $8.04 per square foot per annum or 14.2% of the initial rent. For VNO’s 555 California Street portfolio, 4,000 square feet of space (3,000 square feet at share) was leased for an initial rent of $156.96 per square foot and a weighted average lease term of seven years. The tenant improvements and leasing commissions were $39.07 per square foot per annum, or 24.9% of the initial rent. Vornado ended the quarter with occupancy in the New York portfolio at 89.9%, down 130 basis points (bps) year over year. Occupancy in THE MART declined to 80.3% from 88.9%. However, occupancy in 555 California Street improved 70 bps to 94.9%. Portfolio Activity
In the reported quarter, Vornado and Rudin closed the earlier announced transactions related to their 350 Park Avenue and 40 East 52nd Street properties with Citadel Enterprise Americas LLC (“Citadel”) and with an affiliate of Kenneth C. Griffin, Citadel’s Founder and CEO (“KG”).
Additionally, Vornado entered into a joint venture (JV) with Rudin (“Vornado/Rudin”) to purchase 39 East 51st Street for $40 million. Upon the formation of the KG JV, VNO intends to combine this property with 350 Park Avenue and 40 East 52nd Street to create a premier development site, to be known as “Site” collectively. The transaction is expected to be completed in second-quarter 2023. Balance Sheet
Vornado exited first-quarter 2023 with cash and cash equivalents of $890.9 million, slightly up from $889.7 million as of Dec 31, 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
Currently, Vornado has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Vornado has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Vornado is part of the Zacks REIT and Equity Trust - Other industry. Over the past month, Digital Realty Trust (
DLR Quick Quote DLR - Free Report) , a stock from the same industry, has gained 6.2%. The company reported its results for the quarter ended March 2023 more than a month ago.
Digital Realty Trust reported revenues of $1.34 billion in the last reported quarter, representing a year-over-year change of +18.8%. EPS of $0.19 for the same period compares with $1.67 a year ago.
Digital Realty Trust is expected to post earnings of $1.67 per share for the current quarter, representing a year-over-year change of +7.7%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Digital Realty Trust. Also, the stock has a VGM Score of D.