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Taubman (TCO) Beats Q2 FFO Estimates, Revenues Decrease

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Retail real estate investment trust (REIT) Taubman Centers Inc.’s (TCO - Free Report) reported second-quarter 2017 funds from operations (FFO) per share of 86 cents and adjusted FFO per share of 92 cents. Both the figures surpassed the Zacks Consensus Estimate of 84 cents.

The quarter experienced higher comparable center net operating income (NOI). Further, improved liquidity position was a tailwind.

Revenues came in at $154.7 million, beating the Zacks Consensus Estimate of $139.9 million. However, revenues were down 2.7% from around $158.9 million in the prior-year quarter.

Taubman Centers, Inc. Price, Consensus and EPS Surprise

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share.

Quarter in Detail

Comparable center NOI, excluding lease cancellation income, was up 2.8% year over year while average rent per square foot was $62.08, up 1.6%. For the period ended Jun 30, 2017, the trailing 12-month releasing spreads per square foot were 9.1%.

For the second quarter, mall tenant sales per square foot were up 2.9%. Further, trailing 12-month mall tenant sales per square foot of $782 increased about 2.2%.

However, as of Jun 30, 2017, the comparable centers’ portfolio was 94.6% leased, denoting a 1.1% drop from Jun 30, 2016.

Liquidity

Taubman Centers exited the second quarter with cash and cash equivalents of $42.3 million, up from $40.6 million at year-end 2016.

Guidance

Taubman Centers expects 2017 adjusted FFO per share in the range of $3.67–$3.77.  Also, it expects FFO per share in the range of $3.53–$3.63. The Zacks Consensus Estimate for the year currently stands at $3.73.

The full-year FFO per share guidance is backed by assumptions of comparable center NOI growth, excluding lease cancellation income of about 2% for the year.

Our Viewpoint

The company’s solid retail portfolio, high-quality retailers and diligent restructuring initiatives are likely to support its growth. However, dwindling mall traffic and store closures amid aggressive growth in online sales have kept the retail REITs on tenterhooks. This has emerged as a pressing concern for Taubman.

Currently, Taubman Centers has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has lost 16.3% year to date, underperforming the 2.1% decline of the industry it belongs to.

We now look forward to the earnings releases of GGP Inc. (GGP - Free Report) , Vornado Realty Trust (VNO - Free Report) and HCP, Inc. (HCP - Free Report) , which are expected next week.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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