Vornado Realty Trust (VNO - Free Report) announced that its second-quarter 2018 financial results will include certain items that will increase the company's funds from operation (FFO) per share by 12 cents. However, this amount will be excluded in the adjusted FFO plus assumed conversions per share figure.
These items will have a positive impact of 22 cents per share on the company’s net income for the quarter. Similar to FFO, the adjusted net income will exclude the impact.
The items include a net gain of $23.6 million from the sale of 27 Washington Square North for $45 million. The property was acquired by the company in December 2015, for $20 million. Importantly, this gain will not be included in the Q2 FFO reporting.
The company will also realize profit of $16 million relating to changes in fair value of marketable securities.
Further, the company will record $5.5 million in income and FFO as profit participation from the sale of 701 Seventh Avenue. Vornado received this sale proceed as part of its 25% participation in a mezzanine loan lent by the company in October 2012 for redevelopment of the property. The loan was repaid in January 2014.
Lastly, Vornado's results will include a net loss of $0.4 million from other items. This will increase the company’s Q2 FFO by $2.3 million.
It also stated that the aforementioned figures are preliminary estimates and are conditioned on the completion of the financial closing procedures.
Notably, as part of its portfolio-repositioning efforts, Vornado has been aggressively disposing of its assets. The company has identified $1 billion of assets, which, it expects to sell over the next several years.
In fact, this June, the company announced that it has agreed to sell 49.5% interests in the 666 Fifth Avenue Office Condominium to the company’s partner — the Kushner Companies. (Read more: Vornado (VNO - Free Report) to Sell Stake in 666 Fifth Avenue to Kushner)
Although, well-planned sell-outs provide it with the dry powder to reinvest in opportunistic acquisitions, dilutive impact on earnings from such divestitures cannot be bypassed in the near term.
Shares of Vornado have underperformed the industry it belongs to, in three months’ time. This Zacks Rank #3 (Hold) company’s shares have gained 11%, while the industry rallied 11.9% during this time frame.
Stocks Worth a Look
A few better-ranked stocks from the same space are PS Business Parks (PSB - Free Report) , Lamar Advertising Company (LAMR - Free Report) and Columbia Property Trust, Inc. (CXP - Free Report) . All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PS Business Parks’ Zacks Consensus Estimate for 2018 FFO per share has been revised 0.3% upward to $6.37 over the past month. Its shares have returned 14.2% in the past three months.
Lamar’s FFO per share estimates for 2018 remained unchanged at $5.40 in the past month. The stock has gained 12.4% in three months’ time.
Columbia Property Trust’s FFO per share estimates for 2018 remained unchanged at $1.46 in the past month. The stock has gained 13.3% over the past three months.
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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