Why Is Vornado (VNO) Down 9.7% Since Last Earnings Report?

It has been about a month since the last earnings report for Vornado (VNO). Shares have lost about 9.7% in that time frame, underperforming 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 FFO and Revenues Surpass Estimates in Q1

Vornado Realty Trust’s first-quarter 2022 FFO plus assumed conversions as adjusted per share of 79 cents topped the Zacks Consensus Estimate of 76 cents.

Vornado’s results display year-over-year growth in the same-store NOI in its New York, theMART and 555 California Street portfolios.

Total revenues came in at $442.1 million in the reported quarter, surpassing the Zacks Consensus Estimate of $422.3 million.

Further, on a year-over-year basis, both FFO per share and revenues grew 21.5% and 16.4%, respectively.

Behind the Headlines

In the reported quarter, total same-store NOI (at share) improved 3.1% year over year. While the metric at theMART increased 10%, the same for the New York portfolio grew 2.5%. The same-store NOI (at share) of Vornado’s 555 California Street climbed 3.2%.

However, operating expenses jumped 13.4% to $216.5 million year over year.

During the quarter, in the New York office portfolio, 272,000 square feet of space (236,000 square feet at share) was leased for an initial rent of $81.07 per square foot and a weighted average lease term of 8.8 years. In the New York retail portfolio, 20,000 square feet was leased (all at share) at an initial rent of $171.62 per square foot and a weighted average lease term of 14.1 years.

Additionally, at theMART 149,000 square feet of space (all at share) was leased for an initial rent of $49.79 per square foot and a weighted average lease term of 8.2 years.

VNO leased 56,000 square feet at 555 California (39,000 square feet at share) at an initial rent of $91.49 per square foot and a weighted average lease term of 6.8 years.

During the reported quarter, Vornado closed the sale of one condominium unit at 220 CPS for net proceeds of $15.1 million.

As of Mar 31, 2022, occupancy in the New York portfolio was 91.2%, down from 91.6% at the end of the year-ago quarter. Occupancy in theMART remained unchanged at 88.9%, while occupancy in 555 California Street fell to 94.2% from the prior-year quarter’s 97.8%.

Balance Sheet

Vornado exited first-quarter 2022 with cash and cash equivalents of $973.8 million, down from $1.76 billion as of Dec 31, 2021.

VNO’s consolidated debt as of Mar 31, 2022, was $8.7 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Vornado has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 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 indicates a downward shift. It's no surprise Vornado has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Vornado belongs to the Zacks REIT and Equity Trust - Other industry. Another stock from the same industry, Crown Castle (CCI), has gained 3.2% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Crown Castle reported revenues of $1.74 billion in the last reported quarter, representing a year-over-year change of +17.3%. EPS of $0.97 for the same period compares with $1.71 a year ago.

Crown Castle is expected to post earnings of $1.80 per share for the current quarter, representing a year-over-year change of +5.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.

Crown Castle has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

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