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SL Green (SLG) Up 2.3% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·4-min read

It has been about a month since the last earnings report for SL Green (SLG). Shares have added about 2.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is SL Green due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

SL Green Q3 FFO Surpasses, Revenues Miss Estimates

SL Green delivered third-quarter 2021 FFO per share of $1.78, beating the Zacks Consensus Estimate of $1.58. Further, the reported figure compared favorably with the year-ago quarter’s $1.75.

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Growth in same-store cash NOI aided the company’s performance in the reported quarter.

However, the net rental revenues of $142.7 million in the third quarter lagged the Zacks Consensus Estimate of $161 million. The revenue figure also declined 21.6% from the prior-year quarter’s $173.5 million.

Concurrent with the earnings release, SL Green has inked a 20-year lease with Chelsea Piers Fitness for 55,780 square feet of space, covering the ground, second and B1 and B2 levels at One Madison Avenue.

Quarter in Detail

During the third quarter, the same-store cash NOI, including SL Green’s share of same-store cash NOI from unconsolidated joint ventures, increased 3.6% year over year. This excludes the lease termination income.

In the Manhattan portfolio, the company signed 44 office leases for 445,453 square feet in the reported period. For the reported quarter, the mark-to-market on signed Manhattan office leases edged down 1.8% from the previous fully-escalated rents on the same spaces.

For the Manhattan office leases signed in third-quarter 2021, the average lease term was 10.7 years, while the average tenant concessions were 8.8 months of free rent with a tenant improvement allowance of $77.63 per rentable square foot. This excludes the leases signed at One Vanderbilt Avenue.

As of Sep 30, 2021, Manhattan’s same-store office occupancy, inclusive of leases signed but not yet commenced, was 93.1%, having shrunk 50 basis points from the prior quarter.

The carrying value of its debt and preferred equity portfolio was $1.09 billion as of Sep 30, 2021.

Liquidity

The company exited third-quarter 2021 with cash and cash equivalents of $257.9 million, up from the $218.3 million recorded at the end of the second quarter.

Investment Activity

Under its previously-announced $3.5-billion share-repurchase program, SL Green has repurchased 3.8 million shares since the beginning of this year through Oct 20, 2021.

In the third quarter, the company closed on the proposed sale of its 49% interest in 220 East 42nd Street, for net cash proceeds of $136.1 million.

The company also completed the sale of its interests in 400 East 57th Street, generating net cash proceeds of $19.8 million.

In addition to that, it completed the buyout of fee interest in 1591-1597 Broadway for a purchase price of $121 million.

Dividends

During the July-September quarter, SL Green paid out three monthly dividends of 30.33 cents per share on its common stock in August, September and October, equating to an annualized dividend of $3.64 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, SL Green has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, SL Green has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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