We have reiterated our Neutral recommendation on
Taubman Centers Inc.
), a real estate investment trust (REIT), as we expect the stock to
perform in line with the broader market.The company reported first
quarter 2012 FFO (funds from operations) of $65.1 million or 75
cents per share, compared with $52.7 million or 63 cents in the
Funds from operations, 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, while
adjusted FFO excludes impairment and restructuring charges.
Michigan-based Taubman owns, develops, acquires and operates
regional and super-regional shopping centers throughout the U.S.
Taubman focuses on dominant retail malls that command one of the
highest average sales productivities in the U.S., measured in terms
of mall tenants' average sales per square foot. Mall tenant sales
were $659 per square foot during the reported quarter. Furthermore,
the shopping centers are located in the most affluent regions of
the country, thereby enabling retailers to target high-end upscale
customers and maximize their profitability.
Taubman leases majority of its mall GLA to national retail
chains such as
), Forever 21 and
Limited Brands, Inc
). This high quality roster of national tenants should continue to
generate a steady source of revenue for the company in the coming
quarters as well.
With strong results in the reported quarter, Taubman increased
its 2012 FFO guidance per share from $3.14 - $3.24 to $3.18 -
$3.25. The company has one of the strongest balance sheets in the
sector with adequate liquidity.
Taubman has also taken prudent steps to reduce its operating
expenses by pruning its pre-development spending in the U.S. and
Asia, as well as significantly reducing its overall workforce.
This, in turn, has improved the bottom line of the company.
However, the possibility of store closings at many Taubman
centers due to lease terminations may hamper earnings and it might
have to re-let large big box spaces at significantly lower rents
amid a very tough leasing environment, thereby affecting the
top-line growth of the company in the short term.
Taubman currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating.
GAP INC (GPS): Free Stock Analysis Report
LIMITED BRANDS (LTD): Free Stock Analysis
TAUBMAN CENTERS (TCO): Free Stock Analysis
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