On Jan 9, 2013, we reinstated our long-term Neutral
Taubman Centers Inc.
), a retail real estate investment trust (REIT). The decision
reflects the company's decent third-quarter results, portfolio
strengthening efforts and a healthy balance sheet. Yet, rising
online purchases, huge development and redevelopment pipeline and
tough competition remain our plausible concerns.
Taubman is currently focusing on expanding through development
and reconstruction of properties in major submarkets across the
world. The company, which has a tenant base consisting of
national retailers, disclosed the addition of full-line stores of
) and Bloomingdale's at the Miami Worldcenter development project
in Dec 2013. This inclusion of high quality credit tenants, along
with rising occupancy levels ensures a steady source of rental
revenues going forward.
Additionally, Taubman's third-quarter 2013 FFO per share of 89
cents was 3.5% year over year and 2.3% ahead of the Zacks
Consensus Estimate. Results reflected better-than-expected
revenue growth that was driven by a rise in minimum rents. In
addition, with its solid portfolio of best-in-class retail malls
that command the highest average sales productivity in the U.S.,
Taubman is well poised to improve its results in the quarters
Moreover, the company has established an impressive track
record in returning cash to shareholders through regular
dividends. Taubman never slashed its common dividend since it
went public in 1992. On the contrary, it hiked its payout 16
times since then, leading to a 6.9% compounded annual growth rate
(2004-2013). To further enhance shareholders' value, Taubman
initiated a $200 million share buyback program during the third
quarter. These activities boost shareholders' confidence on the
On the flip side, we believe that though the notable
development and redevelopment pipeline of Taubman is encouraging,
it also increases its operational risks by exposing it to rising
construction costs, entitlement delays and lease-ups. Moreover,
rise in consumer purchases through catalogs and the Internet
could hurt demand for its properties and negatively affect the
overall income of this Zacks Rank #4 (Sell) stock.
Over the last 60 days, the Zacks Consensus Estimate for 2013
FFO per share dipped by a cent to $3.60. For 2014 it remained
stable at $3.82.
Taubman is scheduled to report its fourth-quarter 2013 results
on Feb 12, after the closing bell. The Zacks Consensus Estimate
for FFO per share for the upcoming quarter is pegged at $1.07 per
share, depicting year-over-year growth of 7.00%.
Other Stocks to Consider
Investors interested in the REIT-Equity Trust - Retail
industry may consider stocks like
Cedar Realty Trust, Inc.
Retail Properties of America, Inc.
). Both stocks carry a Zacks Rank #2 (Buy).
Funds from operations, a widely accepted and reported measure
of REITs performance, are derived by adding depreciation,
amortization and other non-cash expenses to net income.
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