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Mack-Cali (CLI) Up 9.7% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·4 min read

A month has gone by since the last earnings report for Mack-Cali Realty (CLI). Shares have added about 9.7% in that time frame, outperforming the S&P 500.

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

Mack-Cali Misses on Q1 FFO, Suspends '20 Guidance

Mack-Cali’s first-quarter 2020 core FFO per share of 33 cents missed the Zacks Consensus Estimate of 37 cents. Moreover, the figure compares unfavorably with the year-ago quarter’s reported tally of 40 cents.

The year-over-year decrease is mainly due to the company’s disposition program.Also, it experienced adverse impact on hotel and parking revenues.

Quarterly revenues of $82.1 million missed the Zacks Consensus Estimate of $124.2 million. The revenue figure also came in 9.1% lower than the prior-year quarter’s $90.3 million.

The company has collected more than 94% of its total commercial rent from office tenants and about 96.7% of its total rent from multifamily tenants for the month of April.

Mack-Cali has withdrawn its current-year guidance on uncertainties related to the coronavirus pandemic.

Quarter in Detail

As of Mar 31, 2020, Mack-Cali’s consolidated core office properties were 81.1% leased, reflecting an increase from 80.7% as of Dec 31, 2019. Notably, the Class A suburban portfolio was leased 90.1%, while Suburban and Waterfront portfolios were leased 79.6% and 78.5%, respectively, as of the same date.

Same-store cash revenues for the office portfolio climbed 7.1% and the same-store cash NOI was up 13.1%, year over year.

During the reported quarter, Mack-Cali executed 16 lease deals, spanning 173,240 square feet, in the company’s core office portfolio. This comprised 23.8% for new leases, and 76.2% for lease renewals and other tenant-retention transactions.

In addition, for the core portfolio, rental rate roll up for core portfolio for first-quarter 2020 transactions was 4.6% on a cash basis.

Further, Roseland's multi-family stabilized operating portfolio was 95.7% leased at the end of the quarter, expanding 70 basis points (bps) from the prior quarter’s end. The multi-family property’s same-store NOI climbed 9.8% for the March-end quarter.

Portfolio Activity

During the first quarter, Mack- Cali concluded the sale of One Bridge Plaza, an office building spanning 200,000 square foot in Fort Lee, NJ, for $36.7 million.

The company also sold two developable lands in Middletown, NJ, and Greenbelt, MD, for $7.6 million and $9.7 million, respectively.

Balance Sheet Position

The company exited first-quarter 2020 with $25.3 million in cash, slightly down from $25.6 million as of Dec 31, 2019.

Mack-Cali’s net debt to adjusted EBITDA was 11.5X for the reported quarter compared with the prior-year quarter’s 9.5X.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

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VGM Scores

Currently, Mack-Cali has a subpar Growth Score of D, however its Momentum Score is doing a bit 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 C. 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 this revision has been net zero. Notably, Mack-Cali has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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