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Is a Beat in Store for Macerich (MAC) This Earnings Season?

Zacks Equity Research

The Macerich Company MAC is scheduled to report first-quarter 2019 results on May 2, before the market opens. The company’s performance is likely to reflect a year-over-year (y/y) decline in revenues and funds from operations (FFO) per share.

In the last reported quarter, this retail real estate investment trust (REIT) delivered in-line results with respect to FFO per share. Results reflected decline in minimum rents and tenant recoveries. Nonetheless, the company witnessed an uptick in occupancy and mall tenant annual sales.

Over the trailing four quarters, Macerich beat estimates on one occasion, missed in another and met in the other two, the average negative surprise being 0.06%. This is depicted in the chart below:

Macerich Company (The) Price and EPS Surprise

Macerich Company (The) Price and EPS Surprise | Macerich Company (The) Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

Recent data from Reis shows that in first quarter, national average asking rent and effective rent inched up 0.4% on a sequential basis and 1.6% year over year for neighborhood and community shopping center.

However, the neighborhood and community shopping center vacancy rate remained flat in the first quarter at 10.2% but marginally inched up from the prior year’s 10%. Additionally, the regional mall vacancy rate witnessed an uptick of 0.3% to 9.3% during the quarter.

Understandably, retail REITs continue to be affected by secular industry headwinds, including retailer downsizing and tenant bankruptcies.  In fact, a report by Coresight Research indicates that store closings have picked up pace this year as retail bankruptcy filings in the first six weeks of 2019 were already at one-third of 2018’s total.

This is expected to impact the company’s first-quarter 2019 revenues. The Zacks Consensus Estimate for first-quarter revenues is pegged at $205.5 million — indicating a y/y fall of 3.3%. The projected decline in minimum rents and percentage rents led to this downside. In fact, minimum rents and percentage rents are expected to slip 2.1% and 3.2%, respectively.

Nonetheless, amid this retail apocalypse narrative, Macerich has been making immense efforts to enhance its asset quality and customer relationships. It is focusing on improving mall traffic and drive sales by trying to grab attention from new and productive tenants.

Further, the Zacks Consensus Estimate for first-quarter revenues from tenant recoveries is pegged at $65 million, indicating 6.5% improvement on a sequential basis.  

In fact, in February, Macerich added a first-to-market brand — Equinox — at the company’s new luxury wing in the Scottsdale Fashion Square. Notably, redevelopment efforts at Scottsdale Fashion Square will enable to maximize the property’s significant luxury position. In fact, the company began revamping the luxury wing by adding new and well-known brands to its tenant list. This will make the retail property a premium shopping destination.

Further, during the January-March quarter, the company made progress with the redevelopment of Westside Pavilion, in West Los Angeles into a 584,000-square-foot Class A urban creative office campus called One Westside. In January, the company signed a lease deal with Google for the entire One Westside redevelopment.

However, Macerich’s activities during the quarter were inadequate to win analysts’ confidence. Consequently, the Zacks Consensus Estimate for FFO per share remained unchanged at 81 cents over the past 30 days. The figure also indicates a year-over-year decline of 1.2%.

Earnings Whispers

Here is what our quantitative model predicts:

Macerich has the right combination of two key ingredients — a positive Earnings ESP  and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Macerich’s Earnings ESP is +1.77%.

Zacks Rank: It currently carries a Zacks Rank of 3.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat in terms of FFO per share. This, when combined with a favorable Zacks rank, makes us reasonably confident of a positive surprise.

Other Stocks That Warrant a Look

Several other players in REIT space are lined up to report their financial results. Below are three stocks, poised to beat on earnings per the proven Zacks model. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alexandria Real Estate Equities, Inc. ARE, scheduled to release earnings on Apr 29, has an Earnings ESP of +0.30% and currently carries a Zacks Rank of 2.

Park Hotels & Resorts Inc. PK, slated to report first-quarter results on May 9, has an Earnings ESP of +0.24% and holds a Zacks Rank of 2, at present.

Welltower, Inc. WELL, set to report quarterly numbers on Apr 30, has an Earnings ESP of +0.58% and carries a Zacks Rank of 3, currently.

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Macerich Company (The) (MAC) : Free Stock Analysis Report
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