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Mack-Cali (CLI) Reports Solid Q3 Earnings: Time to Buy?


On Nov 21, 2016, we issued an updated research report on Mack-Cali Realty Corp. CLI, a real estate investment trust (REIT), focused mainly on office and multi-family rental properties. Its assets are located primarily in the Northeast and the District of Columbia as well.

Mack-Cali reported third-quarter 2016 core funds from operations (“FFO”) per share of 56 cents, beating the Zacks Consensus Estimate by a penny. It was up 16.7% from the prior-year quarter tally of 48 cents. The better-than-expected result was driven by increased base rents in 2016. Moreover, the company’s total revenue registered growth of 7.8% year over year to $157.5 million and exceeded the Zacks Consensus Estimate of $152 million.

On a positive note, we believe that Mack-Cali is making robust strides in its 20/15 strategic plan. This plan is aimed at transforming the company by focusing on the dual platform strategy, comprising office and multifamily properties, on the New Jersey waterfront and other transit-based locations.

It also includes planned exits from non-core markets, capital improvements in core assets, lower expenses in office operations and reduced credit costs through refinancing options. Such transformations and diversification into the apartment sector are expected to drive growth and improve cash flow.

Going forward, we believe that the company’s strong presence in high barrier-to-entry markets, focus on waterfront and transit-oriented office properties, large commercial tenant base and diversification into the apartment sector would fuel its growth engine. However, earnings-dilutive impact of disposition and any rise in interest rate remain potential headwinds.

Nevertheless, reflecting positive sentiments, the Zacks Consensus Estimate for FFO per share inched up by 0.9% to $2.16 for 2016 and climbed 5.5% to $2.32 for 2017, over the past one month.

Zacks Rank & Key Picks

Mack-Cali currently carries a Zacks Rank #2 (Buy).



Investors interested in the REIT industry can also consider other stocks like Duke Realty Corp. DRE, Prologis, Inc. PLD and Preferred Apartment Communities, Inc. APTS. Each of these stocks has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Duke Realty has experienced upward revision in full-year 2016 estimates in the past one month.

Prologis has long-term expected growth rate of 7.2% against the industry average of 5.8%.

Preferred Apartment Communities has a four-quarter average positive earnings surprise of 4.64%.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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