We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
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.
Should You Retain Vornado Realty Stock in Your Portfolio Now?
Read MoreHide Full Article
Vornado Realty Trust’s (VNO - Free Report) ability to cater to the rising demand for premier office spaces with class-apart amenities is likely to drive leasing activity. Its portfolio-repositioning efforts also augur well. A healthy balance sheet position supports the company’s growth endeavors. However, ongoing choppiness in the office real estate market, geographic concentration of assets and competition raise concerns.
This month, the office real estate investment trust (REIT) company reported third-quarter 2024 funds from operations (FFO) plus assumed conversions on an adjusted basis of 52 cents per share, which beat the Zacks Consensus Estimate of 51 cents. However, the figure declined 21.2% year over year. The results displayed better-than-anticipated top-line growth.
What’s Aiding Vornado Realty?
Vornado Realty owns a portfolio of top-quality office properties in a few select high-rent, high-barrier-to-entry markets of New York, Chicago and San Francisco. It boasts a concentration of high-quality assets and a strategic focus on expanding its market share in the New York City office market.
VNO’s focus on having assets in a few select high-rent, high barrier-to-entry geographic markets, as well as a diversified tenant base that includes several industry bellwethers, is expected to drive steady cash flows and fuel its growth over the long term.
Vornado Realty is well-positioned to benefit from the rising rents for the best-in-class redeveloped assets offering abundant amenities at transit-centric locations. Given its ability to offer top-quality office spaces, backed by its redevelopment efforts, it can capitalize on this emerging trend of office-using job growth.
Vornado Realty is focused on improving its core business by 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. The timely portfolio-repositioning initiatives are likely to drive growth over the long term.
VNO has a healthy balance sheet and ample liquidity. As of Sept. 30, 2024, the company had $2.6 billion of liquidity, comprising of $1 billion of cash and cash equivalents and restricted cash and $1.6 billion available under its $2.2 billion revolving credit facilities. A flexible financial position will enable it to take advantage of future investment opportunities and fund its development projects.
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 26.3% compared with the industry's growth of 0.7%.
Image Source: Zacks Investment Research
What’s Hurting Vornado Realty Trust?
With persistent macroeconomic uncertainty and a hybrid working environment, it is expected that near-term demand for office spaces will remain choppy in this market. We estimate a year-over-year decrease of 2.5% in total revenues in 2024.
Vornado Realty has high office market exposure in New York City, along with significant street retail there (86.5% of its net operating income at share for the third quarter of 2024). This concentrated portfolio makes the company’s cash flows vulnerable to the macroeconomic situation prevailing in that region.
VNO faces competition from developers, owners and operators of office properties and other commercial real estate, including sublease space available from its tenants. This affects the company’s ability to attract and retain tenants at relatively higher rents than its competitors, adversely affecting its long-term profitability.
Solid dividend payouts remain the biggest attractions for REIT investors. Although in December 2023, Vornado Realty announced a dividend of 30 cents per share for the fourth quarter of 2023, it marked a reduction of 20% from the prior payout. The company anticipates paying a single common share dividend in the fourth quarter of 2024 as part of its common share dividend policy for the year. We estimate a year-over-year decline of 17.9% in FFO as adjusted in 2024. Hence, any significant turnaround in the dividend payment is likely to remain elusive in the near term.
The Zacks Consensus Estimate for Welltower’s 2024 FFO per share is pinned at $4.26, suggesting year-over-year growth of 17%.
The Zacks Consensus Estimate for Cousins Properties 2024 FFO per share is pegged at $2.68, indicating an increase of 2.3% from the year-ago reported figure.
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
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Should You Retain Vornado Realty Stock in Your Portfolio Now?
Vornado Realty Trust’s (VNO - Free Report) ability to cater to the rising demand for premier office spaces with class-apart amenities is likely to drive leasing activity. Its portfolio-repositioning efforts also augur well. A healthy balance sheet position supports the company’s growth endeavors. However, ongoing choppiness in the office real estate market, geographic concentration of assets and competition raise concerns.
This month, the office real estate investment trust (REIT) company reported third-quarter 2024 funds from operations (FFO) plus assumed conversions on an adjusted basis of 52 cents per share, which beat the Zacks Consensus Estimate of 51 cents. However, the figure declined 21.2% year over year. The results displayed better-than-anticipated top-line growth.
What’s Aiding Vornado Realty?
Vornado Realty owns a portfolio of top-quality office properties in a few select high-rent, high-barrier-to-entry markets of New York, Chicago and San Francisco. It boasts a concentration of high-quality assets and a strategic focus on expanding its market share in the New York City office market.
VNO’s focus on having assets in a few select high-rent, high barrier-to-entry geographic markets, as well as a diversified tenant base that includes several industry bellwethers, is expected to drive steady cash flows and fuel its growth over the long term.
Vornado Realty is well-positioned to benefit from the rising rents for the best-in-class redeveloped assets offering abundant amenities at transit-centric locations. Given its ability to offer top-quality office spaces, backed by its redevelopment efforts, it can capitalize on this emerging trend of office-using job growth.
Vornado Realty is focused on improving its core business by 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. The timely portfolio-repositioning initiatives are likely to drive growth over the long term.
VNO has a healthy balance sheet and ample liquidity. As of Sept. 30, 2024, the company had $2.6 billion of liquidity, comprising of $1 billion of cash and cash equivalents and restricted cash and $1.6 billion available under its $2.2 billion revolving credit facilities. A flexible financial position will enable it to take advantage of future investment opportunities and fund its development projects.
In the past three months, shares of this Zacks Rank #3 (Hold) company have gained 26.3% compared with the industry's growth of 0.7%.
Image Source: Zacks Investment Research
What’s Hurting Vornado Realty Trust?
With persistent macroeconomic uncertainty and a hybrid working environment, it is expected that near-term demand for office spaces will remain choppy in this market. We estimate a year-over-year decrease of 2.5% in total revenues in 2024.
Vornado Realty has high office market exposure in New York City, along with significant street retail there (86.5% of its net operating income at share for the third quarter of 2024). This concentrated portfolio makes the company’s cash flows vulnerable to the macroeconomic situation prevailing in that region.
VNO faces competition from developers, owners and operators of office properties and other commercial real estate, including sublease space available from its tenants. This affects the company’s ability to attract and retain tenants at relatively higher rents than its competitors, adversely affecting its long-term profitability.
Solid dividend payouts remain the biggest attractions for REIT investors. Although in December 2023, Vornado Realty announced a dividend of 30 cents per share for the fourth quarter of 2023, it marked a reduction of 20% from the prior payout. The company anticipates paying a single common share dividend in the fourth quarter of 2024 as part of its common share dividend policy for the year. We estimate a year-over-year decline of 17.9% in FFO as adjusted in 2024. Hence, any significant turnaround in the dividend payment is likely to remain elusive in the near term.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Welltower (WELL - 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 Welltower’s 2024 FFO per share is pinned at $4.26, suggesting year-over-year growth of 17%.
The Zacks Consensus Estimate for Cousins Properties 2024 FFO per share is pegged at $2.68, indicating an increase of 2.3% from the year-ago reported figure.
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.