Taubman Centers, Inc.

Taubman Centers, Inc. ( TCO - Analyst Report ) delivered strong first quarter results as the company beat the Zacks Consensus Estimates on both revenue and earnings. And to top it off, management increased its guidance for the remainder of the year.

This prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).

Based on consensus estimates, analysts project solid earnings growth over the next two years. On top of this, the company pays a dividend that yields 2.5%.

Company Description

Taubman Centers is a real estate investment trust (REIT) focused on shopping centers. The company owns, leases, and/or manages 27 properties throughout the U.S.

It is headquartered in Bloomfield Hills, Michigan and has a market cap of $4.4 billion.

First Quarter Results

Taubman Centers strong first quarter results on April 26. Funds from operation (FFO) per share came in at 75 cents, beating the Zacks Consensus Estimate of 70 cents. It was a 9% increase over the same quarter last year.

Total revenue came in at $169 million, ahead of the consensus of $157 million. This was driven by higher rent and occupancy rates. Leased space at comparable properties increased 150 basis points to 92.0% as average rent per square foot was up 2% to $46.14.

Meanwhile, net operating income (NOI) excluding lease cancellation income increased 9%.

Increased Guidance

Following strong Q1 results, management raised its FFO guidance for 2012 to a range of $3.18-$3.25, up from previous guidance of $3.14 to $3.24. This prompted analysts to revise their estimates higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate for 2012 is now $3.23, within guidance, and representing 14% growth over 2011 FFO. The 2013 consensus is currently $3.46, corresponding with 7% growth.

Dividend

As a REIT, Taubman Centers must pay out at least 90% of its income to shareholders to avoid paying taxes on that money. This has led to a steady rise in distributions over the last several years:

It currently yields a solid 2.5%.

Valuation

Shares of Taubman Centers aren't cheap, but they're not unreasonable either. The stock trades at 22.3x 12-month forward FFO, a premium to its 10-year median of 15.1x. But considering the strong long-term growth potential, this multiple seems reasonable.

And its enterprise value to EBITDA (earnings before interest, taxes, depreciation and amortization) multiple is 9.2, below the industry median of 12.5 and its 10-year median of 10.6.

The Bottom Line

With rising estimates, strong growth prospects, a 2.5% yield and reasonable valuation, Taubman Centers offers a lot to like.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.