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Why Is Vornado (VNO) Up 2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Vornado (VNO - Free Report) . Shares have added about 2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Vornado due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Vornado Realty's Q3 FFO Misses Estimates, Revenues Up

Vornado reported third-quarter 2018 adjusted FFO per share with assumed conversions of 97 cents, missing the Zacks Consensus Estimate of 99 cents. Also, the figure remained flat year over year.

Results reflect decent leasing activity in the New York office portfolio, giving rise to higher occupancy in the overall New York portfolio. However, the company witnessed a decline in same-store net operating income (NOI) and occupancy at its theMART segment.

Total revenues came in at $542 million in the reported quarter, comfortably surpassing the Zacks Consensus Estimate of $537.6 million. Further, the reported figure compares favorably with the year-ago tally of $528.7 million.

Behind the Headline Numbers

In the New York portfolio, 312,000 square feet of office space (308,000 square feet of space at share) and 104,000 square feet of retail space (99,000 square feet of space at share) were leased in the Sep-end quarter. Also, 28,000 square feet of area was leased in theMart.

At the end of the quarter under review, occupancy in the New York portfolio was 97.3%, up 70 bps sequentially, and 40 bps year over year. Occupancy in theMART was 95.5%, down 380 bps sequentially and 320 bps year over year. Furthermore, occupancy in 555 California Street was 99.4%, expanding 210 bps sequentially and 520 bps year over year.

During the third quarter, same-store NOI at the company’s share inched up 0.6% year over year for the New York portfolio. The same for theMART decreased 3.8%, while occupancy at 555 California Street grew 17.2%, year over year, respectively.

As of Sep 30, 2018, Vornado had nearly $772.5 million of cash and cash equivalents, down from $1.8 billion as of the prior-year end.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Vornado has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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


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