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Vornado (VNO) Down 2.6% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

It has been about a month since the last earnings report for Vornado (VNO). Shares have lost about 2.6% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Vornado due for a breakout? 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 drivers.

Vornado’s Q1 FFO & Revenues Miss Estimates, NOI Down

Vornado reported first-quarter 2019 FFO plus assumed conversions, as adjusted of 79 cents per share, missing the Zacks Consensus Estimate of 91 cents. Also, the reported figure compares unfavorably with the year-ago tally of 91 cents.

The decline in FFO as adjusted was attributed to 8 cents per share of non-cash expense for the vesting of previously-issued OP Units and Vornado’s restricted stock.

The company exited the quarter with lower year-over-year occupancy at its New York and theMART portfolios. Further, a decline in same-store net operating income (NOI) witnessed in these segments unfavorably impacted results.

Total revenues came in at $534.7 million in the reported quarter, missing the Zacks Consensus Estimate of $547.5 million. The reported figure also compares unfavorably with the year-ago tally of $536.4 million.

Behind the Headline Numbers

In the New York portfolio, 396,000 square feet of office space (350,000 square feet of space at share) and 49,000 square feet of retail space (43,000 square feet of space at share) were leased in the March-end quarter. Also, 159,000 square feet of area was leased in theMart and 61,000 square feet was leased at 555 California Street (43,000 square feet at share).

At the end of the reported quarter, occupancy in the New York portfolio was 97%, flat sequentially, and shrinking 10 basis points (bps) year over year. Occupancy in theMART was 94.9%, down 20 bps sequentially and 420 bps year over year. Furthermore, occupancy in 555 California Street was 99.4%, remaining flat sequentially, and up 160 bps year over year.

During the first quarter, total same-store net operating income (NOI) edged down 0.1% year over year. In fact, same-store NOI at the company’s share edged down 0.1% year over year for the New York portfolio. The same for theMART declined 4.3%, while at 555 California Street it grew 7.3%, year over year, respectively.

As of Mar 31, 2019, Vornado had nearly $307 million of cash and cash equivalents, down from $570.9 million as of the prior-year end.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Vornado has a poor Growth Score of F, however its Momentum Score is doing a bit better 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 F. 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 indicates a downward shift. 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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