Mack-Cali (CLI) Down 18.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Mack-Cali Realty (CLI). Shares have lost about 18.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Mack-Cali due for a breakout? 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's Q4 FFO Beats, Revenues Miss Estimates

Mack-Cali’s fourth-quarter 2019 core FFO per share of 44 cents surpassed the Zacks Consensus Estimate of 41 cents. However, the figure compares unfavorably with the year-ago quarter’s reported tally of 45 cents.

The company’s same-store cash NOI for the office portfolio increased year over year. However, there was a slowdown in leasing activity in its office portfolio.

Quarterly revenues of $86.7 million missed the Zacks Consensus Estimate of $138.7 million, as well as came in lower than the prior-year quarter’s $90.3 million.

For full-year 2019, Mack-Cali reported core FFO per share of $1.62, displaying a decline of 11.5% from the prior year’s $1.83. Revenues for the year came in at $350.9 million, down 4% year on year.

Quarter in Detail

As of Dec 31, 2019, Mack-Cali’s consolidated core office properties were 80.7% leased, reflecting a decline from 83.2% as of Dec 31, 2018. Notably, Class A suburban portfolio was leased 89.7%, while Suburban and Waterfront portfolios were leased 79% and 77.8%, respectively, as of the same date.

Same-store cash revenues for the office portfolio inched up 0.9%, and the same-store cash NOI was up 3.5% year over year.

During the reported quarter, Mack-Cali executed 21 lease deals, spanning 169,333 square feet, in the company’s consolidated in-service commercial portfolio. This comprised 30.5% for new leases, and 69.5% for lease renewals and other tenant-retention transactions.

In addition, for the core portfolio, rental rate roll up for fourth-quarter 2019 transactions was 6.5% on a cash basis. For new transactions, rental rate roll up was 5.8% on a cash basis, while for renewals and other tenant retention deals, it was 6.7% on a cash basis.

Moreover, Roseland's multifamily stabilized operating portfolio was 95% leased at the end of the quarter, shrinking 170 basis points (bps) from the prior quarter’s end. Same-store NOI climbed 5.4% year over year.

Portfolio Activity

During the fourth quarter, Mack- Cali concluded the sale of its 1386-unit residential community in Malden and Revere, MA for $411.5 million. Further, the company sold an 180,000-square-foot fully-leased office building — 3600 Route 66 — in Neptune, NJ for $26.05 million. The company also sold a 317,000-square-foot office building — 5 Wood Hollow Road — in Parsipanny, NJ for $29.3 million.

Balance Sheet Position

Mack-Cali’s net debt to adjusted EBITDA was 9.7X for the fourth quarter compared with 9.3X in the prior-year quarter.

Finally, the company exited fourth-quarter 2019 with $25.6 million in cash, down from $29.6 million as of Dec 31, 2018.

Guidance

Mack-Cali expects 2020 core FFO per share of $1.24-$1.36. The company projects office occupancy (year-end % leased) of 79-81% and dispositions of $1.0-$1.2 billion for the ongoing year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted 8.33% due to these changes.

VGM Scores

At this time, Mack-Cali has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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 looks promising. It's no surprise Mack-Cali has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.