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Why Is Mack-Cali (CLI) Down 3.3% Since Last Earnings Report?

Zacks Equity Research
3M (MMM) closed the most recent trading day at $172.84, moving -0.29% from the previous trading session.

It has been about a month since the last earnings report for Mack-Cali Realty (CLI). Shares have lost about 3.3% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mack-Cali 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.

Mack-Cali Q1 FFO & Revenues Miss Estimates, NOI Down

Mack-Cali’s first-quarter 2019 core FFO per share of 40 cents missed the Zacks Consensus Estimate of 41 cents. The figure compares unfavorably with the year-ago quarter’s reported tally of 50 cents.

Quarterly revenues of $134.25 million missed the Zacks Consensus Estimate of $138.09 million. The reported figure also came in lower than the prior-year quarter’s $138.97 million.

Q1 Highlights

As of Mar 31, 2019, Mack-Cali’s consolidated core office properties were 80.9% leased, which shrunk 220 basis points (bps) from the prior-quarter end. Same-store cash revenues for the office portfolio descended 6.4%, while same-store cash NOI was down 5.4%.

During the reported quarter, Mack-Cali executed 14 lease deals (excluding Flex), spanning around 198,470 square feet, at the company’s consolidated in-service commercial portfolio. This comprised 60.4% for new leases, and 39.6% for lease renewals and other tenant-retention deals.

In addition, for the core portfolio, rental rate roll up for first-quarter 2019 deals (excluding Flex) was 9.4% on a cash basis. For new transactions, rental rate roll up was 13.1% on a cash basis, while for renewals and other tenant retention deals, it was 7.7% on a cash basis.

The company’s residential stabilized operating portfolio was 96.3% leased at the end of the quarter. Also, same-store NOI climbed 3.9% in the first quarter.

Mack-Cali executed non-core asset sales of $563 million, including the sale of its flex portfolio for $487.5 million in the quarter.

Guidance

Mack-Cali’s projected core FFO per share for 2019 remains unchanged at $1.57-$1.67. Further, the company did not change its projections for office occupancy (year-end % leased) of 79-83% and dispositions (excluding flex) of $155-$180 million for full-year 2019.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Mack-Cali 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 C on the value side, putting it in the middle 20% 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. It's no surprise Mack-Cali has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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