Risk/Reward Balanced at Macerich - Analyst Blog


On Jun 20, 2014, we issued an updated research report on retail real estate investment trust (REIT), The Macerich Company ( MAC ).

On Apr 29, after posting strong results in the past few quarters, Macerich's first-quarter 2014 adjusted funds from operations (FFO) per share of 81 cents missed the Zacks Consensus Estimate by 4 cents and the year-ago quarter figure by a nickel.  This was due to higher-than-expected snow removal and utilities costs, resulting from bad weather conditions.

Nevertheless, we believe Macerich's premium operating portfolio of high quality malls positioned across the thriving U.S. markets promises better growth prospects and will boost its top line. Also, improving consumer confidence is expected to drive demand for retail goods and hence, Macerich that provides real estate support to the retail sector, is expected to benefit from it.

Additionally, amid lower supply of new properties, steadily rising demand is shaping up as the sector's growth driver. Apart from this, portfolio restructuring activities bode well. Recently, Macerich disclosed the details of the planned expansion and renovations at Fashion Outlets of Niagara Falls USA. This refurbishment of the property will strengthen its dominance in the Upstate New York/Toronto region and is thus a strategic fit. 

However, Macerich's geographic concentration of assets and stiff competition are headwinds for its growth going forward. Furthermore, rising online sales that adversely affect the demand for retail space remains a concern and an anticipated increase in the interest rate may dent the financial results in the future.

Over the last 7 days, the Zacks Consensus Estimate for FFO per share for both 2014 and 2015 currently stands stable at $3.56 and $3.79, respectively. The stock carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Better-ranked stocks in the REIT industry include Retail Properties of America, Inc. ( RPAI ), Rouse Properties, Inc. ( RSE ) and Chambers Street Properties ( CSG ). All these stocks carry the Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.

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MACERICH CO (MAC): Free Stock Analysis Report

CHAMBERS ST PPT (CSG): Free Stock Analysis Report

RETAIL PROPERTS (RPAI): Free Stock Analysis Report

ROUSE PROPERTS (RSE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: MAC , CSG , RPAI , RSE



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