Key Factors to Impact Vornado (VNO) This Earnings Season
Vornado Realty Trust VNO is scheduled to report first-quarter 2020 results on May 4, after the closing bell. Results are projected to display year-over-year declines in revenues and funds from operations (FFO) per share.
In the last reported quarter, this New York-based real estate investment trust (REIT) reported a positive surprise of 7.2% in terms of FFO per share. Total same-store net operating income (NOI) in the New York portfolio as well as at theMART and 555 California aided the company’s performance in the fourth quarter.
Over the preceding four quarters, Vornado exceeded the Zacks Consensus Estimate on two occasions and missed in the other two, the average negative surprise being 1.7%. This is depicted in the graph below:
Vornado Realty Trust Price and EPS Surprise
Vornado Realty Trust price-eps-surprise | Vornado Realty Trust Quote
Let’s see how things have shaped up for this announcement.
Factors to Consider
A report from Newmark Knight Frank suggests that the U.S. office market was unstable during first-quarter 2020. The ongoing coronavirus pandemic and the consequent economic downturn hauled the methodological growth witnessed by the US office market. In fact, in the last weeks of the quarter, most investment and leasing activities in the office market were put on hold, reflected in a significant year-over-year decline in absorption to 2 million square feet of space for the first quarter.
The impacts of the pandemic have been more acute in New York, as office-leasing activity gradually dampened in the first quarter amid increasing governmental restrictions on public gatherings and market uncertainty. In fact, the office deal volume aggregated 4.5 million square feet of space — the weakest leasing activity observed in at least 25 years, per a report by Jones Lang LaSalle.
Amid these factors, Vornado, which has concentrated New York City office property holdings (roughly 87% of its NOI in 2019 accounted from New York City area), is expected to have witnessed higher vacancy and concession activity as well as lower rents. Notably, the Zacks Consensus Estimate for rentals for the company’s New York properties was pinned at $279 million. This indicates a year-over-year decline of 19.6%.
Further, due to the pandemic, the company’s retail properties are expected to have remained closed as a result of the ongoing restrictions on public gatherings. This is anticipated to have increased tenant risk, mall traffic, sales and occupancy.
Amid this, occupancy at the company’s New York retail portfolio for first-quarter 2020 is estimated to have remained flat year over year at 97%. Moreover, the Zacks Consensus Estimate for first-quarter revenues is pinned at $447.5 million, suggesting a decline of 16.3% year on year.
Also, prior to its quarterly earnings release, the company has been witnessing downward estimate revisions. As such, the Zacks Consensus Estimate for first-quarter FFO per share has been revised marginally downward to 76 cents over the past month, reflecting analysts’ bearish sentiments. Additionally, it suggests a year-over-year decline of 3.8%
Earnings Whispers
Our proven model doesn’t predict a positive surprise in terms of FFO per share for Vornado this time around. The combination of a positive Earnings ESP and Zacks Rank #3 (Hold) or better increases the odds of a FFO beat. But that’s not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Vornado has an Earnings ESP of -4.26%.
Zacks Rank: The company currently carries a Zacks Rank of 4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:
CoreSite Realty Corporation COR, slated to release first-quarter earnings on Apr 30, has an Earnings ESP of +3.19% and a Zacks Rank of 3 at present.
Americold Realty Trust COLD, expected to release earnings results on May 7, has an Earnings ESP of +9.74% and a Zacks Rank #3.
SBA Communications Corporation SBAC, set to report quarterly numbers on May 5, currently has an Earnings ESP of +0.67% and a Zacks Rank of 3.
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 Realty Trust (VNO) : Free Stock Analysis Report
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