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Vornado (VNO) to Report Q4 Earnings: What's in the Cards?
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Vornado Realty Trust (VNO - Free Report) is scheduled to report fourth-quarter and full-year 2023 results on Feb 12 after market close. The quarterly results are likely to reflect a year-over-year decline in both 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 per share met the Zacks Consensus Estimate of 66 cents. Results displayed lower-than-anticipated revenues.
Over the trailing four quarters, Vornado’s FFO plus assumed conversions as adjusted per share surpassed the Zacks Consensus Estimate on two occasions, met in another and missed in the remaining period, the average beat being 4.18%. This is depicted in the graph below:
Per a Cushman & Wakefield (CWK - Free Report) report, the economic uncertainty, hybrid work environment and declines in office-using employment continued to keep occupiers cautious about office leasing decisions, resulting in a decrease in new leasing activity and renewals in the fourth quarter.
The fourth quarter of 2023 marked the eighth straight quarter for office demand being negative. Net negative absorption for the quarter was -19.2 million square feet (msf), which pushed the 2023 annual total to -77.5 msf.
The overall U.S. gross leasing activity in 2023 was 282 msf, which reflected a decline of 21% from the prior year. Moreover, the national vacancy rate climbed 200 basis points (bps) in 2023 and finished the year at 19.7%, which marks an all-time high. The national asking rent came in at $37.67 in the quarter.
However, total leasing increased quarter over quarter in 31 U.S. markets. This included all three Manhattan markets, San Francisco, San Jose, Charlotte and Austin.
Moreover, across a fourth of U.S. markets, vacancy fell, and it remained below 15% in 35 of the markets that were followed by Cushman & Wakefield. Premium quality office space continued to be in demand and outperformed the broader market. Particularly, office vacancy for such assets is almost 300 bps below the overall average, while asking rents are 40% higher.
Projections
Although Vornado has a portfolio of premium office assets, strategically situated in sought-after markets like New York, Chicago and San Francisco, its performance in the to-be-reported quarter is likely to have been affected by the choppy environment in the office real estate market.
Also, competition from developers, owners and operators of office properties and other commercial real estate, including sublease space available from its tenants, might have partly limited VNO’s ability to increase rents and/or backfill tenant move-outs and vacancies during the quarter.
The Zacks Consensus Estimate for quarterly revenues is pegged at $444.37 million, suggesting a marginal decrease of 0.58% from the year-ago quarter’s reported figure.
The consensus mark for Vornado’s New York revenues stands at $355.19 million, indicating a decline from $366.70 million in the prior-year quarter. The consensus estimate for occupancy in the New York office portfolio is pegged at 91.70%, down from 91.90% reported a year ago.
Further, higher interest expenses are expected to have been a spoilsport.
The company’s activities during the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised a cent downward to 59 cents over the past month. The figure also suggests an 18.06% decline from the prior-year period’s reported number.
For the full year, the Zacks Consensus Estimate for FFO per share is pegged at $2.57. The figure indicates an 18.41% decrease year over year on 0.76% year-over-year growth in revenues to $1.81 billion.
Q4 Activity
Vornado, in collaboration with SL Green (SLG - Free Report) , declared a 15-year renewal and expansion lease with a premier financial services tenant for 269,905 square feet of space spanning six floors at 280 Park Avenue. This tenant, making a long-term commitment, solidifies the building's reputation as a best-in-class, 1.25 million-square-foot Midtown Manhattan office space that is owned in a joint venture between Vornado and SL Green.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Vornado this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
Vornado currently carries a Zacks Rank of 3 and has an Earnings ESP of -2.36%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — VICI Properties Inc. (VICI - Free Report) and American Homes 4 Rent (AMH - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Vornado (VNO) to Report Q4 Earnings: What's in the Cards?
Vornado Realty Trust (VNO - Free Report) is scheduled to report fourth-quarter and full-year 2023 results on Feb 12 after market close. The quarterly results are likely to reflect a year-over-year decline in both 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 per share met the Zacks Consensus Estimate of 66 cents. Results displayed lower-than-anticipated revenues.
Over the trailing four quarters, Vornado’s FFO plus assumed conversions as adjusted per share surpassed the Zacks Consensus Estimate on two occasions, met in another and missed in the remaining period, the average beat being 4.18%. This is depicted in the graph below:
Vornado Realty Trust Price and EPS Surprise
Vornado Realty Trust price-eps-surprise | Vornado Realty Trust Quote
US Office Market
Per a Cushman & Wakefield (CWK - Free Report) report, the economic uncertainty, hybrid work environment and declines in office-using employment continued to keep occupiers cautious about office leasing decisions, resulting in a decrease in new leasing activity and renewals in the fourth quarter.
The fourth quarter of 2023 marked the eighth straight quarter for office demand being negative. Net negative absorption for the quarter was -19.2 million square feet (msf), which pushed the 2023 annual total to -77.5 msf.
The overall U.S. gross leasing activity in 2023 was 282 msf, which reflected a decline of 21% from the prior year. Moreover, the national vacancy rate climbed 200 basis points (bps) in 2023 and finished the year at 19.7%, which marks an all-time high. The national asking rent came in at $37.67 in the quarter.
However, total leasing increased quarter over quarter in 31 U.S. markets. This included all three Manhattan markets, San Francisco, San Jose, Charlotte and Austin.
Moreover, across a fourth of U.S. markets, vacancy fell, and it remained below 15% in 35 of the markets that were followed by Cushman & Wakefield. Premium quality office space continued to be in demand and outperformed the broader market. Particularly, office vacancy for such assets is almost 300 bps below the overall average, while asking rents are 40% higher.
Projections
Although Vornado has a portfolio of premium office assets, strategically situated in sought-after markets like New York, Chicago and San Francisco, its performance in the to-be-reported quarter is likely to have been affected by the choppy environment in the office real estate market.
Also, competition from developers, owners and operators of office properties and other commercial real estate, including sublease space available from its tenants, might have partly limited VNO’s ability to increase rents and/or backfill tenant move-outs and vacancies during the quarter.
The Zacks Consensus Estimate for quarterly revenues is pegged at $444.37 million, suggesting a marginal decrease of 0.58% from the year-ago quarter’s reported figure.
The consensus mark for Vornado’s New York revenues stands at $355.19 million, indicating a decline from $366.70 million in the prior-year quarter. The consensus estimate for occupancy in the New York office portfolio is pegged at 91.70%, down from 91.90% reported a year ago.
Further, higher interest expenses are expected to have been a spoilsport.
The company’s activities during the to-be-reported quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised a cent downward to 59 cents over the past month. The figure also suggests an 18.06% decline from the prior-year period’s reported number.
For the full year, the Zacks Consensus Estimate for FFO per share is pegged at $2.57. The figure indicates an 18.41% decrease year over year on 0.76% year-over-year growth in revenues to $1.81 billion.
Q4 Activity
Vornado, in collaboration with SL Green (SLG - Free Report) , declared a 15-year renewal and expansion lease with a premier financial services tenant for 269,905 square feet of space spanning six floors at 280 Park Avenue. This tenant, making a long-term commitment, solidifies the building's reputation as a best-in-class, 1.25 million-square-foot Midtown Manhattan office space that is owned in a joint venture between Vornado and SL Green.
Here Is What Our Quantitative Model Predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Vornado this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is not the case here.
Vornado currently carries a Zacks Rank of 3 and has an Earnings ESP of -2.36%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks That Warrant a Look
Here are two stocks from the broader REIT sector — VICI Properties Inc. (VICI - Free Report) and American Homes 4 Rent (AMH - Free Report) — you may want to consider as our model shows that these have the right combination of elements to report a surprise this quarter.
VICI Properties, scheduled to report quarterly numbers on Feb 22, has an Earnings ESP of +2.16% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Homes 4 Rent, slated to release quarterly numbers on Feb 22, has an Earnings ESP of +0.80% and carries a Zacks Rank of 3 at present.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.