Vornado Realty to Report Q1 Earnings: What's in the Cards?

Vornado Realty Trust VNO is scheduled to report first-quarter 2025 results on May 5, after market close. While the company’s quarterly results are likely to display a year-over-year rise in revenues, funds from operations (FFO) per share might display a decline.

In the last reported quarter, this New York-based real estate investment trust’s (REIT) FFO per share, plus assumed conversions, on an adjusted basis of 61 cents, outpaced the Zacks Consensus Estimate of 51 cents. Results displayed better-than-anticipated top-line growth.

Over the trailing four quarters, Vornado’s FFO per share, plus assumed conversions, on an adjusted basis, surpassed the Zacks Consensus Estimate on three occasions and missed on the remaining period, the average surprise being 5%. This is depicted in the graph below:

Vornado Realty Trust Price and EPS Surprise

Vornado Realty Trust price-eps-surprise | Vornado Realty Trust Quote

U.S. Office Market in Q1

Per a Cushman & Wakefield report, the U.S. office demand showed resilience amid macroeconomic uncertainties in the first quarter of 2025. The shift in economic policies under the Trump administration could not majorly impact it as of the end of the first quarter.

During the first quarter, though net absorption turned out to be negative, the four-quarter rolling absorption was the strongest in the past two years. The four-quarter rolling net absorption for the broader office space was positive for a third of the U.S. markets. The metric at negative 35 million square feet (MSF) improved 30% quarter over quarter and 48% year over year.

Demand for quality offices was on the upswing, as evident in the four-quarter rolling absorption in Class A buildings, which surpassed the broader office market, improving 36% quarter over quarter and 55% year over year. As such, the vacancy turned out to be uneven. Nearly half of the office buildings have single-digit vacancies or no vacancies at all. In the first quarter of 2025, office demand was positive for one-third of the U.S. market.

Moreover, supply pressures are continuously receding due to decreasing sublease activities and dwindling new construction activity. National sublease availabilities fell 9.5% year over year, with the trend being broad-based, prevalent in two-thirds of the U.S. market. The under-construction pipeline stood at 26.2 MSF, nearly half down from the first quarter of 2024 and just one-fifth of the first quarter of 2020 pipeline, representing only 0.5% of the current inventory. At the same time, new deliveries in the first quarter were the lowest quarterly total in the past 12 years at just 4.1 MSF. The current pipeline is 80% less than that at the beginning of 2020.

Factors to Consider Ahead of VNO’s Results

Vornado’s portfolio of premium office assets strategically situated in a few select high-rent, high-barrier-to-entry markets of New York, Chicago and San Francisco, is likely to have witnessed healthy demand during the quarter, aiding leasing activity.

A diversified tenant base, which includes several industry bellwethers, is expected to have led to stable cash flow generation during the quarter.

However, its performance in the to-be-reported quarter is likely to have been affected by the choppy environment in the office real estate market.

Further, high interest expenses are expected to have been a spoilsport during the to-be-reported quarter.

VNO’s Projections

The Zacks Consensus Estimate for quarterly revenues is pegged at $449.9 million, suggesting an increase of 3.1% from the year-ago quarter’s reported figure.

The consensus mark for Vornado’s New York revenues stands at $369.1 million, indicating a rise from $358.2 million in the prior-year quarter.

The consensus mark for Vornado’s other revenues is pegged at $78.7 million, up from $78.1 million reported in the prior-year quarter.

However, the Zacks Consensus Estimate for occupancy in the New York office portfolio is pegged at 85.35%, down from 89.3% reported a year ago.

The company’s activities during the to-be-reported quarter were adequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has revised a cent upward to 52 cents over the past week. However, the figure suggests a 5.5% decline from the prior-year period’s reported number.

What Our Quantitative Model Predicts

Our proven model predicts a likely surprise in terms of FFO per share for Vornado this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an FFO beat, which is the case here.

Vornado has an Earnings ESP of +7.13% and currently carries a Zacks Rank of 2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are two stocks from the other REIT industry — Medical Properties Trust MPW and Ryman Hospitality Properties RHP — that you may want to consider, as our model shows that these have the right combination of elements to report a surprise this quarter.

Medical Properties Trust is slated to report quarterly numbers on May 1. MPW has an Earnings ESP of +12.68% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

RHP, scheduled to report quarterly numbers on May 1 has an Earnings ESP of +1.34% and a Zacks Rank of 3. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

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.

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This article originally published on Zacks Investment Research (zacks.com).

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