On Wednesday, Evercore ISI adjusted its outlook on Vornado Realty Trust (NYSE:VNO), increasing the price target to $45.00, up from the previous target of $40.00. The firm has kept an Outperform rating on the stock.
The revision follows a conference call held on Tuesday, which revealed several positive developments not initially included in the quarterly earnings release. These include a robust leasing pipeline and a completed agreement with New York University (NYU) for 770 Broadway.
Vornado Realty Trust's third-quarter performance demonstrated an uptick in leasing activity, with the company signing 454,000 square feet of leases, which indicates a continued positive momentum in the New York leasing market. This was a point of emphasis during Tuesday's conference call.
The leasing pipeline has grown to 2.8 million square feet, up from 2.6 million square feet in the previous quarter. Evercore ISI expects occupancy rates to rise to 87.3% by the end of 2024 for the New York segment, up from 86.7% at the end of the third quarter.
The analyst highlighted the PENN 2 project as a key catalyst for Vornado's stock. A detailed bull-bear case analysis was conducted to determine the potential per-share impact of different lease-up periods and market rents. As a result of the analysis, Evercore ISI's 2024 earnings estimate for Vornado increased slightly from $2.08 to $2.10, while the 2025 estimate decreased from $2.15 to $2.07.
Additionally, a revised net asset value (NAV) calculation has placed a higher value on 350 Park Avenue, considering Citadel's purchase option and an increased valuation for PENN 2, among other adjustments. This recalculated NAV has risen by $3, from $52 to $55, which stands significantly higher than the current stock price of $42.
The upgrade in the price target to $45 reflects the analyst's confidence in Vornado Realty Trust's leasing trajectory and strategic property deals, such as the finalized lease with NYU and the anticipated success of the PENN 2 development.
In other recent news, Vornado Realty Trust has delivered impressive Q2 2024 earnings that exceeded consensus estimates by $0.04 per share, demonstrating strong leasing momentum by filling over two-thirds of recent vacancies. The company's financial stability was underscored by $2.7 billion in liquidity, which included $1.1 billion in cash.
Additionally, Vornado Realty successfully sold its share of the Uniqlo Fifth Avenue flagship store for $350 million, further highlighting its effective monetization efforts.
Analysts from Scotiabank (TSX:BNS) and Truist Securities have adjusted their price targets for Vornado Realty, while BMO (TSX:BMO) Capital Markets upgraded the company's stock from Market Perform to Outperform. Piper Sandler maintained its neutral stance on the company's shares, reflecting a wait-and-see approach to Vornado's long-term redevelopment plans.
Vornado Realty has also revealed plans to pay off $450 million of unsecured debt maturing in January 2025 and has engaged with Cushman & Wakefield to attract demand from other markets to the PENN District. Despite management's cautious stance on future FFO guidance, analysts anticipate a likely increase in the 2025 FFO.
These recent developments reflect Vornado Realty's strategic positioning and the quality of its property offerings.
InvestingPro Insights
Recent data from InvestingPro adds depth to Evercore ISI's bullish outlook on Vornado Realty Trust (NYSE:VNO). The company's market capitalization stands at $8.86 billion, reflecting its significant presence in the real estate sector. VNO's stock has shown remarkable strength, with a 88.78% total return over the past year and a 60.53% return in the last six months, aligning with the analyst's positive sentiment.
InvestingPro Tips highlight that VNO has maintained dividend payments for 34 consecutive years, which may appeal to income-focused investors. However, it's worth noting that the company's net income is expected to drop this year, and analysts do not anticipate profitability in the near term. This information provides context to Evercore ISI's revised earnings estimates for 2024 and 2025.
The stock is currently trading near its 52-week high, with the price at 97.05% of its peak, suggesting strong market confidence. This aligns with Evercore ISI's increased price target and the positive leasing momentum mentioned in the article. For investors seeking more comprehensive analysis, InvestingPro offers additional tips and metrics to further evaluate VNO's potential.
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