Vornado Earnings: Manhattan Office Outlook Improves but Shares Are Rich

No-moat-rated Vornado Realty reported a middling set of numbers in the third quarter as the firm recorded adjusted funds from operations, or FFO, of $102.8 million or $0.52 per share, which was around 21% lower than the $127.2 million or $0.66 per share FFO reported in the third quarter of the previous year. Most of the year-over-year decline in FFO can be attributed to lower net operating income from lease expirations that were expected by management largely at the 770 Broadway, 1290 Avenue, and 280 Park Avenue properties and higher net interest expense. Management maintained its previous guidance as it expects 2024 comparable FFO to have a $0.30 per share impact from higher interest rates and a $0.25-$0.30 per share impact from increased vacancies. The impact of higher rates on the company's bottom line should reverse as interest rates decline. We are maintaining our $28.50 per share fair value estimate for Vornado Realty after incorporating third-quarter results.