We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Vornado (VNO) Surges 35.6% in 6 Months: Will the Trend Last?
Read MoreHide Full Article
Shares of Vornado Realty Trust (VNO - Free Report) have soared 35.6% in the past six months compared with the industry’s growth of 9.5%.
The company owns a concentration of high-quality office properties strategically located in markets of New York, Chicago and San Francisco. It is poised to benefit from tenants’ healthy demand for premier office spaces with class-apart amenities. However, the overall choppy office real estate landscape and a high interest rate environment raise concerns for the company.
This month, the company reported better-than-expected second-quarter 2024 results. It reported funds from operations (FFO) plus assumed conversions as adjusted per share of 57 cents, which surpassed the Zacks Consensus Estimate of 55 cents.
Analysts seem bullish about this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 FFO per share has revised 1.9% upward over the past month to $2.12.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price.
Vornado's focus on having assets in a few select high-rent, high-barrier-to-entry markets, along with a diversified tenant base that includes several industry bellwethers, are expected to drive steady cash flows and fuel its growth over the long term.
The office-using job growth and the expansion of technology, finance and media firms are set to bolster rental revenues in the upcoming periods. New York continues to attract office occupiers aiming to expand their workspace. Per management, the New York office leasing market, particularly in Midtown, continues to be upbeat in the second half of the year.
Rents in the newly constructed or best-in-class redeveloped assets, which offer ample amenities at transit-centric locations, have risen. Hence, the company is well-positioned to benefit from the emerging trend.
Vornado is making opportunistic developments and divestitures in addition to business spin-offs. Strategic sell-outs provide the company with the dry powder to reinvest in opportunistic developments and redevelopments.
In May 2024, Vornado sold 49.9% interest in 50-70 West 93rd Street to its joint venture partner and received net proceeds of $2 million. Hence, timely portfolio-repositioning initiatives are likely to drive growth over the long term. Moreover, in the second quarter of 2024, Vornado sold two condominium units at 220 Central Park South (CPS) for net proceeds of around $31.6 million.
Vornado enjoys solid balance sheet strength. As of Jun 30, 2024, the company had $2.7 billion of liquidity, consisting of $1.1 billion of cash and cash equivalents and restricted cash and $1.6 billion available under its $2.2 billion revolving credit facilities. Further, apartment sales at 220 CPS are likely to add to its cash balance and enhance financial strength. A flexible financial position will enable it to take advantage of future investment opportunities and fund its development projects.
However, with persistent macroeconomic uncertainty and a hybrid working environment, it is expected that near-term demand for office spaces will remain choppy. Also, high interest rates pose a concern for the company.
The Zacks Consensus Estimate for Four Corners’ 2024 FFO per share stands at $1.72, indicating an increase of 3% from the year-ago reported figure.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share is pinned at $2.66, suggesting year-over-year growth of 1.5%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
See More Zacks Research for These Tickers
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Vornado (VNO) Surges 35.6% in 6 Months: Will the Trend Last?
Shares of Vornado Realty Trust (VNO - Free Report) have soared 35.6% in the past six months compared with the industry’s growth of 9.5%.
The company owns a concentration of high-quality office properties strategically located in markets of New York, Chicago and San Francisco. It is poised to benefit from tenants’ healthy demand for premier office spaces with class-apart amenities. However, the overall choppy office real estate landscape and a high interest rate environment raise concerns for the company.
This month, the company reported better-than-expected second-quarter 2024 results. It reported funds from operations (FFO) plus assumed conversions as adjusted per share of 57 cents, which surpassed the Zacks Consensus Estimate of 55 cents.
Analysts seem bullish about this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 FFO per share has revised 1.9% upward over the past month to $2.12.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price.
Vornado's focus on having assets in a few select high-rent, high-barrier-to-entry markets, along with a diversified tenant base that includes several industry bellwethers, are expected to drive steady cash flows and fuel its growth over the long term.
The office-using job growth and the expansion of technology, finance and media firms are set to bolster rental revenues in the upcoming periods. New York continues to attract office occupiers aiming to expand their workspace. Per management, the New York office leasing market, particularly in Midtown, continues to be upbeat in the second half of the year.
Rents in the newly constructed or best-in-class redeveloped assets, which offer ample amenities at transit-centric locations, have risen. Hence, the company is well-positioned to benefit from the emerging trend.
Vornado is making opportunistic developments and divestitures in addition to business spin-offs. Strategic sell-outs provide the company with the dry powder to reinvest in opportunistic developments and redevelopments.
In May 2024, Vornado sold 49.9% interest in 50-70 West 93rd Street to its joint venture partner and received net proceeds of $2 million. Hence, timely portfolio-repositioning initiatives are likely to drive growth over the long term. Moreover, in the second quarter of 2024, Vornado sold two condominium units at 220 Central Park South (CPS) for net proceeds of around $31.6 million.
Vornado enjoys solid balance sheet strength. As of Jun 30, 2024, the company had $2.7 billion of liquidity, consisting of $1.1 billion of cash and cash equivalents and restricted cash and $1.6 billion available under its $2.2 billion revolving credit facilities. Further, apartment sales at 220 CPS are likely to add to its cash balance and enhance financial strength. A flexible financial position will enable it to take advantage of future investment opportunities and fund its development projects.
However, with persistent macroeconomic uncertainty and a hybrid working environment, it is expected that near-term demand for office spaces will remain choppy. Also, high interest rates pose a concern for the company.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Four Corners Property Trust (FCPT - Free Report) and Cousins Properties (CUZ - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Four Corners’ 2024 FFO per share stands at $1.72, indicating an increase of 3% from the year-ago reported figure.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share is pinned at $2.66, suggesting year-over-year growth of 1.5%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.