On Jun 20, 2014, we issued an updated research report on retail
real estate investment trust (REIT),
The Macerich Company
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
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.
Rouse Properties, Inc.
Chambers Street Properties
). All these stocks carry the Zacks Rank #2 (Buy).
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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