Empire State Earnings: Strong Observatory Recovery Drives Decent Results

No-moat-rated Empire State Realty reported middling second-quarter results as the core funds from operations, or FFO, were reported at $0.26 per share in the current quarter, around 11% lower than the $0.29 in core FFO during the same quarter last year. The demand for Manhattan office real estate remains muted due to macroeconomic factors and a slower recovery in physical office utilization rates. The shares have rallied by around 50% in the past few months on the back of some encouraging Manhattan office building transactions. The shares are still currently trading around 10% below our fair value estimate for the firm. We are maintaining our fair value estimate of $9.50 per share for Empire State Realty after incorporating the second-quarter results.