On Oct 4, 2013, we reiterated our long-term Neutral
The Macerich Company
). The decision reflects the company's decent performance in the
recent quarters, successful portfolio repositioning moves and an
improving balance sheet.
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Why the Reiteration?
Macerich's portfolio of high quality malls positioned across the
most attractive U.S. markets drive occupancy and revenue growth.
Moreover, significant developments and portfolio restructuring
activities strengthened the long-term growth prospects. Macerich
boasts a cluster of industry leading tenants such as
Abercrombie & Fitch Co.
), which are well-capitalized retailers.
In tandem with its winning streak, Macerich reported impressive
quarterly results on the back of solid operating fundamentals.
The company reported second-quarter 2013 adjusted funds from
operations (AFFO) per share of 87 cents, beating the Zacks
Consensus Estimate of 81 cents. Moreover, this was substantially
higher than the year-ago figure of 74 cents. Strong escalation in
revenues, overall portfolio occupancy and re-leasing spreads
aided the results.
Moreover, for full-year 2013, Macerich raised its FFO per share
guidance in the range of $3.38-3.48 from the prior range of
$3.35-3.45. The guidance increase also boosts investors'
confidence in the stock.
Yet, its substantial development pipeline increases its
operational risks. Amid the technological advancements, there is
a significant rise in online shopping through the Internet,
mobile phones and tablets. This in turn affects the demand for
physical stores and thereby adversely affects the demand for the
company's properties. Also, rising interest rates hamper the
company's cost of borrowing.
Over the last 60 days, the Zacks Consensus Estimate for 2013 FFO
per share escalated 1.5% to $3.49, while that for 2014 moved
north by 0.6% to $3.64. Consequently, Macerich now carries a
Zacks Rank #2 (Buy).
Macerich is scheduled to report its third-quarter 2013 earnings
on Oct 28, 2013, after the closing bell. The Zacks Consensus
Estimate for FFO per share for the upcoming quarter is pegged at
83 cents per share, depicting a year-over-year increase of 6.61%.
Other Stock to Consider
Another retail REIT that is currently performing better is
Simon Property Group Inc.
), which has a Zacks Rank #2 (Buy).
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.