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Here's Why You Should Retain Macerich (MAC) Stock for Now

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The Macerich Company (MAC - Free Report) is well-poised to benefit from its portfolio of premium shopping centers located in the vibrant markets of the United States having favorable demographics. These densely populated areas have an affluent customer base with a significant disposable income. This offers the company enough scope to generate decent cash flows and positions it well for a strong post-pandemic rebound.

Moreover, given the relaxations in the pandemic-related restrictions and widespread vaccination drives, traffic at retail outlets and tenant sales have considerably improved, with figures surpassing the 2021 and the pre-pandemic levels. With retail demand on the rise, tenant sales are likely to continue gaining momentum, aiding Macerich’s rent growth.  

In addition, to enhance its portfolio, Macerich has been following an aggressive capital-recycling program. Through this, the company divests its non-core and slow-growing assets and uses the proceeds for acquisitions and developments and redevelopment activities. Particularly, for the 2013-2021 period, MAC raised $2.2 billion of liquidity through capital recycling from non-core asset sales. Such moves highlight its prudent capital-management practices and release the pressure off its balance sheet.

Macerich maintains a healthy balance-sheet position with ample liquidity. As of Jul 28, the company had more than $630 million of liquidity. Its net debt to forward EBITDA, excluding leasing costs, was 9.0X as of the same date. With a well-laddered debt maturity profile and enough financial flexibility, MAC is well-positioned to capitalize on long-term growth opportunities.

However, given the conveniences of online shopping, rising e-commerce adoption is still a concern for Macerich. Online retailing will likely remain a popular choice among customers, thus adversely impacting the market share for brick-and-mortar stores.

Further, higher interest rates might increase the company's borrowing costs, affecting its ability to purchase or develop real estate. More so, the dividend payout might become less attractive than the yields on fixed income and money market accounts.

Analysts, too, seem bearish on this Zacks Rank #3 (Hold) stock. The Zacks Consensus Estimate for the company’s 2022 funds from operations (FFO) per share has been unchanged over the past month, indicating an unfavorable outlook for MAC.

Shares of Macerich have lost 18% in the past three months compared with its industry’s decline of 7%.

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the retail REIT sector are STORE Capital (STOR - Free Report) , Kite Realty Group Trust (KRG - Free Report) and SITE Centers Corp. (SITC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for STORE Capital’s 2022 FFO per share has moved nearly 1% upward in the past week to $2.17.

The Zacks Consensus Estimate for Kite Realty’s 2022 FFO per share has moved 1.1% upward in the past month to $1.84.

The Zacks Consensus Estimate for SITE Centers' ongoing year’s FFO per share has been raised nearly 1% over the past two months to $1.16.

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

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