Vornado Realty Trust
(
VNO
), a leading real estate investment trust (REIT), reported second
quarter 2012 funds from operations (FFO) of $0.89 per share,
compared to $1.27 in the year-earlier quarter.
We cover below the results of the recent earnings announcement,
as well as the subsequent analyst estimate revisions and the Zacks
ratings for the short-term and long-term outlook for the stock.
Earnings Report Review
After adjusting items for comparability, FFO during the second
quarter of 2012 was $211.6 million or $1.13 per share, compared
with $220.3 million or $1.15 in the prior-year quarter. The
recurring FFO per share during second quarter 2012 surpassed the
Zacks Consensus Estimate of $0.96.
Total revenues during the reported quarter were $700.6 million
compared with $696.0 million in the year-ago period. Total revenues
during the quarter were well ahead of the Zacks Consensus Estimate
of $685 million.
Same-store occupancy in the company's New York City and
Washington, DC portfolios were 95.4% and 85.9%, respectively, at
quarter-end. Same-store EBITDA (earnings before interest, tax,
depreciation and amortization) on GAAP basis increased 2.9% and
decreased 8.1% during the quarter in the New York City and DC
portfolios respectively, compared with the year-earlier
quarter.
(Read our full coverage on this earnings report:
Vornado Adjusted FFO Beats Estimates
)
Earnings Estimate Revisions - Overview
Fiscal earnings estimates have been a mixed bag for Vornado
Realty since the earnings release, meaning that analysts are
skeptical about the long-term performance of the company. Let's dig
into the earnings estimate details.
Agreement of Estimate Revisions
In the last seven days, 2012 earnings estimates were raised by
three analysts out of nine covering the stock, while one had
lowered. For 2013, three out of nine analysts covering the stock
have revised their estimates down, while only one have increased it
during the same time period. This indicates that the earnings
estimates for the current year have a positive directional
movement, while that of the following year is skewed towards the
negative.
Magnitude of Estimate Revisions
Earnings estimates for 2012 have remained steady in the last
seven days at $4.99. For 2013, earnings estimates have dropped by 7
cents during the last seven days to $5.05, which signifies that
although the market fundamentals are gradually improving, they are
yet to reach their optimum range to gain sufficient investor
confidence over a long-term period.
Moving Forward
The long-term earnings estimate picture for Vornado Realty is
neutral. Vornado Realty has office properties in two of the best
long-term office markets in the country, New York City and
Washington DC.
These high-barrier markets have held up comparatively well and
have enabled the company to continue increasing rents. The company
also has a strong balance sheet with manageable near-term debt
maturities and adequate liquidity to take advantage of distressed
selling as asset values of office and retail properties continue to
drop.
However, the company's retail properties and Toy 'R' Us
investment has suffered in the recent past due to recession, which
in turn has negatively affected earnings. Vornado Realty owns about
32.7% of Toys 'R' Us - the leading global retailer of dedicated
toys and baby products. This undermines the long-term growth
potential of the company.
We maintain our Neutral rating on Vornado Realty, which
currently has a Zacks #3 Rank that translates into a short-term
Hold rating. We also have a Neutral recommendation and a Zacks #3
Rank for
Brookfield Properties Corporation
(
BPO
), one of the competitors of Vornado Realty.
Note: FFO, a widely used metric to gauge the performance
of
REI
T, is obtained after adding depreciation and amortization and
other non-cash expenses to net income.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two
of the most celebrated stock rating systems in use today. The
Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months).
These "Earnings Estimate Scorecard" articles help analyze the
important aspects of estimate revisions for each stock after
their quarterly earnings announcements. Learn more about earnings
estimates and our proven stock ratings at
http://www.zacks.com/education/
BROOKFLD OFFICE (BPO): Free Stock Analysis
Report
VORNADO RLTY TR (VNO): Free Stock Analysis
Report
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