Vornado (VNO) Reports Items to be Included in 1Q19 Results

Vornado Realty Trust VNO recently announced that its first-quarter 2019 financial results will include certain items that will contribute to the company's funds from operation (FFO) plus assumed conversions per share by 51 cents. However, this amount will be excluded in the FFO, as adjusted figure.

These items will have a positive impact of 82 cents per share on the company’s net income for the quarter. Similar to FFO, the adjusted net income will exclude the impact.

The items include an after-tax net gain of $130.9 million or 64 cents per share from the sale of 220 Central Park South condominium units.

The company will also record prepayment penalty of $22.5 million relating to the redemption of 5% senior unsecured notes worth $400 million due January 2022. This will impact the company’s net income and FFO by 11 cents per share. 

Lastly, Vornado's results will include a net loss of $4.1 million from other items. This will decrease the company’s first-quarter FFO by 2 cents per share.

Since 2019 results will reflect a new GAAP accounting standard under which internal leasing costs can no longer be capitalized, the company has provided adjustments in 2018 “as adjusted” financial results, which capitalized internal leasing costs. This makes the previous-year results comparable with the financial results in 2019. 

Specifically, FFO as adjusted for first-quarter 2018 and full-year 2018 have been reduced by 1 cent and 3 cents per share, respectively.

Notably, Vornado is focused on improving its core business and in line with this, it is redeploying sale proceeds to fund strategic acquisitions and redevelopments. Although these dispositions are strategic for long-term growth, the dilutive impact on earnings cannot be bypassed in the near term.

Also, shares of this Zacks #3 (Hold) Ranked company have underperformed the industry it belongs to, over the past three months. The company’s shares have gained 4.2%, while the industry recorded growth of 11.6%, during this time period. 

Stocks to Consider

Investors can also consider better-ranked stocks from the same space like Terreno Realty Corporation TRNO, Cousins Properties Incorporated CUZ and Boston Properties, Inc. BXP, carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Terreno Realty’s FFO per share estimates for 2019 remained unchanged at $1.42, in the past month. Furthermore, it has a long-term growth rate of 8.70%.

Cousins Properties’ Zacks Consensus Estimate for first-quarter 2019 FFO per share remained unchanged at 20 cents, in the past month. Also, it has a long-term growth rate of 3.50%.

Boston Properties’ FFO per share estimate for the ongoing year has been revised marginally north to $6.93 in 30 days’ time. Additionally, it has a long-term growth rate of 6.30%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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