Vornado Earnings: Lackluster Guidance & Same-Store Portfolio Performance Drove Weak Results

No-moat-rated Vornado Realty reported a weak set of numbers in the first quarter, as adjusted funds from operations, or FFO, was reported at $108.8 million ($0.55 per share), which was around 7% lower than the $116.3 million FFO ($0.60 per share) reported in the first quarter of the previous year. The year-over-year decline in FFO can mostly be attributed to lower net operating income, or NOI, from higher interest expenses and lease expirations. Management expects 2024 comparable FFO to be affected by higher interest rates and increased vacancies. The impact of higher interest rates on FFO is estimated to be about $0.30 per share and the impact from increased vacancies is estimated to be around $0.25-$0.30 per share. The impact of higher rates on the bottom line of the company should reverse when interest rates start to decline. For upcoming vacancies, management suggested that most of the impact should be temporary, as a good percentage of this space has already been leased up, but the effect of new leases would not begin to show up until sometime in 2025. We are maintaining our $28.50 per share fair value estimate for Vornado Realty after incorporating first-quarter results.