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Why Is Vornado (VNO) Up 7.6% Since Last Earnings Report?

Zacks Equity Research
The Corpus Christi project is the third export facility in the United States that produces LNG, after Cheniere's (LNG) Sabina Pass and Dominion's Cove Point terminal.

It has been about a month since the last earnings report for Vornado (VNO). Shares have added about 7.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Vornado 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.

Vornado Realty Q2 FFO & Revenues Top, Liquidity Down

Vornado reported second-quarter 2018 FFO per share with assumed conversions of $1.10, beating the Zacks Consensus Estimate of 97 cents. Further, the figure surpassed the prior-year quarter tally of $1.35.

Results reflect healthy leasing activity in the New York office portfolio. In addition, the company witnessed robust same-store net operating income (NOI) in theMART and 555 California Street segments.

Total revenues came in at $541.82 million in the reported quarter, handily surpassing the Zacks Consensus Estimate of $536.3 million. However, this compares unfavorably with the year-ago revenue figure of $626.04 million.

Behind the Headline Numbers

In the New York portfolio, 611,000 square feet of office space (545,000 square feet of space at share) and 49,000 square feet of retail space were leased in the June-end quarter. Also, 50,000 square feet of area was leased in theMart.

At the end of the quarter under review, occupancy in the New York portfolio was 96.6%, down 30 basis points (bps) sequentially, while remaining flat year over year. Occupancy in theMART was 99.3%, up 20 bps sequentially and 40 bps year over year. Furthermore, occupancy in 555 California Street was 97.3%, shrinking 50 bps sequentially, while expanding 660 bps year over year.

During the second quarter, same-store NOI at the company’s share increased 4.2% year over year for the New York portfolio. The same for theMART and 555 California Street grew 5.2% and 13.5%, respectively, year over year.

As of Jun 30, 2018, Vornado had nearly $1.1 billion of cash and cash equivalents, down from $1.8 billion as of the prior-year end.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Vornado has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.

The company's stock is suitable solely for momentum based on our style scores.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. 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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