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SL Green (SLG) Up 9.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for SL Green (SLG). Shares have added about 9.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

SL Green Q1 FFO Tops Estimates, NOI & Occupancy Decline

SL Green reported first-quarter 2021 FFO per share of $1.73, surpassing the Zacks Consensus Estimate of $1.58. The reported figure includes a lease termination income of 14 cents per share. However, first-quarter 2021 FFO per share declined year over year. The year-ago figure included 47 cents of incremental income from Credit Suisse at One Madison Avenue.

Net rental revenues of $162.8 million in the first quarter outpaced the Zacks Consensus Estimate of $162 million. However, the figure declined 16.7% from the prior year period’s $195.5 million.

As of Apr 21, the company’s gross tenant billing collection for first-quarter 2021 was 95.3%. This includes 98% from office and 85% from retail tenants. While cost-control measures aided bottom-line growth, a decline in rental and investment income dents top-line performance.

Concurrent with the earnings release, SL Green announced the sale of its stake in two residential properties. This is in line with its strategy to divest non-core assets, inclusive of residential properties, and redeploy capital in share repurchase programs and development projects.

The company also announced a lease signed with Vashi — a British fine jewelry brand — for 11,777 square feet at 110 Greene Street in SoHo. The tenant will lease out the space for 15 years.

Quarter in Detail

In the first quarter, same-store cash NOI, including SL Green’s share of same-store cash NOI from unconsolidated joint ventures, decreased 1.4% year over year. This excludes lease termination income.

In the Manhattan portfolio, the company signed 21 office leases for 352,752 square feet in the reported period. The mark-to-market on signed Manhattan office leases was 2.8% lower in the first quarter than the previous fully-escalated rents in the same spaces.

As of Mar 31, 2021, Manhattan’s same-store office occupancy, inclusive of leases signed but not yet commenced, was 94.2%, down 20 basis points from the prior quarter.

The carrying value of its debt and preferred equity portfolio was $1.13 billion as of Mar 31, 2021.

Liquidity

As of the first-quarter end, the company had cash and cash equivalents of $305 million, up from $266 million recorded at the end of 2020.

Investment Activity

Under its $3.5-billion share-repurchase program, the company repurchased 1.5 million shares from the start of 2021 through Apr 21, 2021.

In the first quarter, it divested its 25% stake in the commercial condominium units — Tower 46 — located at 55 West 46th Street for net cash proceeds of $20.9 million.

Dividends

For the first quarter, SL Green paid out three monthly dividends of 30.33 cents per share on its common stock in February, March and April, equating to an annualized dividend of $3.64 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, SL Green has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 downward for the stock, and the magnitude of these revisions has been net zero. Notably, 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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