Back to top

Image: Bigstock

Macerich (MAC) Q4 Earnings: What's in Store for the Stock?

Read MoreHide Full Article

The Macerich Company (MAC - Free Report) — a retail real estate investment trust (REIT) — is scheduled to report fourth-quarter and 2017 results on Feb 5, after the market closes. Its funds from operations (FFO) per share and revenues are anticipated to decline year over year.

Last quarter, the company reported FFO per share of 96 cents, lagging the Zacks Consensus Estimate by 2%. Results reflected a decrease in portfolio occupancy and total revenues. Nonetheless, the quarter witnessed improvement in same-center net operating income (NOI).

Over the trailing four quarters, Macerich beat estimates on three occasions and missed once, resulting in an average beat of 1.66%. This is depicted in the chart below:

Macerich Company (The) Price and EPS Surprise

Further, the stock has outperformed the industry. While the company’s shares have gained 11%, the industry has rallied 10.1% over the past six months.

Factors That Might Influence Q4 Results

Macerich enjoys a portfolio of premium malls in vibrant U.S. markets. The presence of a number of well-capitalized retailers in its portfolio enabled the company to maintain a stable source of rent for the past few quarters. Additionally, Macerich’s omni-channel distribution model, steadily rising demand and aggressive capital-recycling program amid modest supply, augur well for growth.

Nevertheless, mall traffic continues to remain considerably depressed with more and more consumers opting for online purchases. This has led to an increasing number of retailers jumping on the dot-com bandwagon. Retailers are also reconsidering their footprint and opting for store closures.

Furthermore, retailers unable to keep up with the intense competition in the industry have been filing bankruptcies. This is a pressing concern for retail REITs, as the trend has been significantly dragging down demand for the retail real estate space. This choppy retail real estate market situation is also said to have led to tenants demanding substantial lease concessions, though the mall landlords find it unjustified.

Subsequently, the company’s minimum rental revenues will likely experience a fall from the prior-year quarter. The company realizes minimum rents on a straight-line basis. The Zacks Consensus Estimate for fourth-quarter minimum rental revenues is currently pegged at $151 million. This indicates a 5% decline on a year-over-year basis.  

Percentage rents, realized when tenants' specified sales targets have been met, is also anticipated to witness a steep year-over-year decline due to the tepid retail environment. The Zacks Consensus Estimate of $9.87 million reflects a 15% plunge from the prior-year quarter.  

Prior to the fourth-quarter earnings release, there is lack of any solid catalyst for raising optimism about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for FFO per share in the soon-to-be-reported quarter remained unchanged at $1.14, over the past month. Further, this indicates a decline of 2.6% year over year.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $234.4 million, indicating a year-over-year fall of 13.8%.

For full-year 2017, the Zacks Consensus Estimate for revenues stands at $888.7 million. The consensus estimate for FFO per is $3.94, reflecting a year-over-year decrease of 3.2%. Management expects FFO per share in the range of $3.90-$4.00.

Earnings Whispers

Our proven model does not conclusively show that Macerich will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.

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

Zacks ESP: The Earnings ESP for Macerich is -0.59%.

Zacks Rank: Macerich has a Zacks Rank #4 (Sell).

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider as our model shows these have the right combination of elements to report a positive surprise this time around:

CubeSmart (CUBE - Free Report) , slated to release fourth-quarter results on Feb 15, has an Earnings ESP of +1.10% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Diamondrock Hospitality Company (DRH - Free Report) , scheduled to report quarterly numbers on Feb 28, has an Earnings ESP of +4.76% and a Zacks Rank #3.

Weingarten Realty Investors , slated to release quarterly numbers on Feb 21, has an Earnings ESP of +0.41% and a Zacks Rank of 3.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


Macerich Company (The) (MAC) - $25 value - yours FREE >>

CubeSmart (CUBE) - $25 value - yours FREE >>

DiamondRock Hospitality Company (DRH) - $25 value - yours FREE >>

Published in