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Macerich (MAC) to Report Q2 Earnings: What's in the Cards?

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The Macerich Company (MAC - Free Report) — a retail real estate investment trust (REIT) — is scheduled to report second-quarter 2017 results on Aug 2 after the market closes. Its revenues and funds from operations (“FFO”) for the quarter are expected to witness a year-over-year decline.

Last quarter, the company reported FFO per share of 87 cents, delivering a positive earnings surprise of 3.57%.

Macerich beat estimates in each of the trailing four quarters, witnessing an average positive earnings surprise of 2.40%. The graph below depicts this surprise history.
 

Macerich Company (The) Price and EPS Surprise

 

Macerich Company (The) Price and EPS Surprise | Macerich Company (The) Quote

Note: The EPS presented in the above chart represents funds from operations (FFO) per share.

Factors to Influence Q2 Results

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

However, a geographically concentrated portfolio, along with increasing consumer purchases through the internet, has emerged as a pressing concern for this retail REIT. These have made retailers reconsider their footprint and eventually opt for store closures. Also, retailers not able to cope with competition have been filing bankruptcies.

Macerich’s extensive development projects increase its operational risks and are likely to hinder any growth in margins. Further, a rise in interest rate is a concern for the company as this would affect its financial flexibility.

In addition, Macerich’s activities during the quarter were inadequate to gain analyst confidence. Consequently, the Zacks Consensus Estimate for Q2 FFO remained unchanged at 94 cents over the last 30 days.

Earnings Whispers

Our proven model does not conclusively show that Macerich will likely beat FFO estimates this time around. 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 Most Accurate estimate and the Zacks Consensus Estimate are pegged at 95 cents and 94 cents, respectively, translating into an Earnings ESP of +1.06%.

Zacks Rank: Macerich currently carries a Zacks Rank #4 (Sell), which actually reduces the predictive power of ESP.

The stock has lost 18.3% year to date, underperforming the 4.6% decline of the industry it belongs to.




Stocks That Warrant a Look

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

Regency Centres Corporation (REG - Free Report) , scheduled to release second-quarter results on Aug 3, has an Earnings ESP of +1.12% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here
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CyrusOne Inc (CONE - Free Report) , slated to release earnings on Aug 2, has an Earnings ESP of +2.70% and a Zacks Rank #2.

Ramco-Gershenson Properties Trust (RPT - Free Report) , set to release quarterly numbers on Aug 1, has an Earnings ESP of +2.94% and a Zacks Rank #3.

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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