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Mack-Cali (CLI) Up 13.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Mack-Cali Realty (CLI - Free Report) . Shares have added about 13.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mack-Cali due for a pullback? 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.

Mack-Cali Q2 FFO Surpass Estimates, Fall Y/Y, Revenues Miss

Mack-Cali’s Q2 core FFO per share of 45 cents surpassed the Zacks Consensus Estimate by a cent. However, the figure came in lower than the year-ago tally of 60 cents.  

Notably, performance of the company’s core office portfolio was disappointing. Additionally, the company revised its estimate for 2018 core FFO per share downward.

Also, total revenues of around $126.6 million missed the Zacks Consensus Estimate of $131 million.

Q2 Highlights

As of Jun 30, 2018, Mack-Cali’s consolidated core office properties were 83.2% leased, which shrunk 200 basis points (bps) from the prior-quarter end. Same-store cash revenues for the office portfolio descended 4.9%, while same-store cash net operating income (NOI) fell 5.7%.
 
During the reported quarter, Mack-Cali executed 51 lease deals, spanning around 453,337 square feet of space, at the company’s consolidated in-service commercial portfolio. This comprised 46% for new leases, and 54% for lease renewals and other tenant-retention deals.

Further, for the core portfolio, rental rate roll up for second-quarter 2018 deals was 7.5% on a cash basis. For new transactions, rental rate roll up was 2.9% on a cash basis, while for renewals and other tenant retention deals, it was 7.9% on a cash basis.

The company’s residential same-store portfolio remained 97.5% leased at the quarter’s end. However, same-store NOI edged down 1.3% in the quarter under review.

Liquidity

Mack-Cali exited second-quarter 2018 with cash and cash equivalents of $29.7 million, marginally up from $28.2 million recorded at the end of December 2017.

In addition, as of Jun 30, 2018, the company had a debt-to-undepreciated assets ratio of 44.6% compared with 47.5% as of Jun 30, 2017.

Guidance

Mack-Cali revised its projected core FFO per share to $1.80-$1.86, from the earlier estimate of $1.80-$1.90.

The company projects office occupancy (year-end % leased) of 84-86% and dispositions of $375-$425 million for full-year 2018. This will mark completion of Mack-Cali’s major disposition program. Sales in the future will occur on a select one-off basis.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Mack-Cali has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Mack-Cali has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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