SL Green (SLG) Up 5.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for SL Green (SLG). Shares have added about 5.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is SL Green 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 catalysts.
SL Green's Q3 FFO Surpasses Estimates, Revenues Dip Y/Y
SL Green reported third-quarter 2019 FFO of $1.75 per share, surpassing the Zacks Consensus Estimate of $1.73. The figure also compares favorably with the year-ago quarter’s reported tally of $1.66.
Results reflected decent leasing activity in the company’s Manhattan portfolio. Further, total revenues for the quarter improved year over year.
Net rental revenues of $215.45 million in the third quarter lagged the Zacks Consensus Estimate of $215.63 million. The revenue figure also declined as compared to the prior-year tally of $221.8 million.
Quarter in Detail
For the third quarter, same-store cash NOI, including SL Green’s share of same-store cash NOI from unconsolidated joint ventures, inched up 1.5% as compared with the prior-year period. This excludes free rent and lease termination income given to Viacom for space at 1515 Broadway.
In the Manhattan portfolio, SL Green signed 31 office leases for 268,349 square feet of space during the quarter. The average lease term on these leases is 7.2 years, while average tenant concessions were 3.9 months of free rent.
Importantly, for the third quarter, the mark-to-market on signed Manhattan office replacement leases was 3.2% higher than the previous fully-escalated rents on the same spaces. As of Sep 30, 2019, Manhattan’s same-store occupancy, inclusive of leases signed but not yet commenced, was 95.3%, up 10 basis points as compared with the prior quarter.
The company also decreased the carrying value of its debt and preferred equity investment portfolio to $1.99 billion.
Liquidity
SL Green exited the September-end quarter with cash and cash equivalents of nearly $121.7 million, down from $129.5 million recorded at the end of 2018.
Investment Activity
The company has repurchased 2.7 million shares of common stock and Operating Partnership units under its $2.5-billion share-repurchase program, in the year-to-date period. The shares were bought back at an average price of $84.08 per share.
Additionally, the company entered into a contract to sell 1010 Washington Boulevard in Stamford, CT, for $23.1 million. This transaction, projected to generate cash proceeds of $21.6 million, will likely close in fourth-quarter 2019.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, SL Green has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
SL Green has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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