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Here's Why Macerich (MAC) Stock is an Apt Portfolio Pick

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Given the rebound in retail demand, The Macerich Company (MAC - Free Report) is experiencing healthy demand for its premium shopping centers located in the vibrant markets of the United States. Retailers are continuing to rent out more physical store spaces, which is aiding leasing activity and helping the company backfill its spaces.

This June, MAC welcomed the Ireland-based retail brand — Primark — to its Green Acres Mall in Long Island, NY, replacing a former JCPenney site.

Moreover, MAC has a solid tenant roster and a majority of its shopping centers are located in densely populated areas having an affluent customer base with a significant disposable income. This enables the company to generate decent cash flows. We expect its total revenues to improve 3.5% for 2023, 3.2% for 2024 and 4.4% for 2025 on a year-over-year basis.

The company’s focus on the re-use and mixed-use of its properties by recapturing and repositioning anchor tenants augurs well. Its efforts to better utilize space and ring in premium brands at its properties are likely to drive more footfall and boost sales. Also, the adoption of omni-channel retailing is expected to pay off well.

This June 2023, MAC acquired the remaining 50% interest in five former Sears boxes, encompassing a total gross leasable area of 819,000 square feet, from its joint venture partner — Seritage Growth Properties — and now wholly owns and controls each parcel.  The move provides scope to undertake redevelopment opportunities at these properties and enrich them with renowned in-demand retailers.

Further, Macerich has been following an aggressive capital-recycling program to enhance its overall portfolio quality. Through this, it divests its non-core and slow-growing assets and uses the proceeds for acquisitions, developments and redevelopment activities. These measures highlight its prudent capital-management practices.

The company maintains a healthy balance sheet position and has a well-laddered debt maturity profile. This is expected to enable the company to capitalize on long-term growth opportunities.

Shares of this Zacks Rank #2 (Buy) company have gained 23.7% in the past three months compared with the industry’s growth of 7.9%.

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Nonetheless, given the conveniences of online shopping, high e-commerce adoption is concerning for Macerich. Also, limited consumers’ willingness to spend amid persistent macroeconomic uncertainty could impair the company’s performance to some extent.

A high interest rate environment could raise the company's borrowing costs, affecting its ability to purchase or develop real estate.

Other Stocks to Consider

Some other top-ranked stocks in the retail REIT sector are Regency Centers (REG - Free Report) , Kite Realty Group Trust (KRG - Free Report) and Phillips Edison & Company (PECO - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Regency Centers’ current-year’s funds from operations (FFO) per share has moved marginally upward over the past month to $4.12.

The consensus estimate for Kite Realty’s 2023 FFO per share has been raised marginally northward over the past month to $1.97.

The Zacks Consensus Estimate for Phillips Edison & Company’s ongoing year’s FFO per share has moved marginally upward over the past two months to $2.30.

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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