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What's in the Cards for Macerich (MAC) This Earnings Season?

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The Macerich Company (MAC - Free Report) — a retail real estate investment trust (REIT) — is scheduled to report first-quarter 2018 results on May 2, after the market closes. Its funds from operations (FFO) per share and revenues are anticipated to decline year over year.

In the last reported quarter, the company posted FFO per share of $1.13, lagging the Zacks Consensus Estimate by 0.8%. Results underscored a contraction in portfolio occupancy and total revenues.

Over the trailing four quarters, Macerich beat estimates in two occasions for as many misses, resulting in an average beat of 1.2%. This is depicted in the chart below:

Macerich Company (The) Price and EPS Surprise

Factors That Might Influence Q1 Results

Macerich has a secure portfolio of premium malls in vibrant U.S. markets. We anticipate the company to have enjoyed stable source of rent in the to-be-reported quarter from its tenants that include several well-capitalized retailers.

Additionally, Macerich’s omni-channel distribution model, steadily rising demand and aggressive capital-recycling program amid modest supply are expected to have been conducive to the company’s Jan-Mar quarter performance.

Amid prevalent challenges in the retail real estate sector, during the quarter, Macerich formed a joint venture with Hudson Pacific Properties to transform the iconic mall — The Westside Pavilion  — into an office space.

Although the company is resorting to different strategies, mall traffic continues to remain considerably depressed with consumers increasingly opting for online purchases. This has led to a rising number of retailers joining the dot-com bandwagon. In fact, the first few months of the year witnessed several preeminent retail bankruptcy filings and record-high defaults by retail corporates.

Subsequently, the company’s minimum rental revenues are expected to have registered a fall from the prior-year quarter. The company realizes minimum rents on a straight-line basis. The Zacks Consensus Estimate for the first-quarter minimum rental revenues is currently pegged at $142 million. This indicates a sequential decline of 6%.  

Percentage rents, realized when tenants' specified sales targets have been met, is also anticipated to witness significant year-over-year drop due to the tepid retail environment. The Zacks Consensus Estimate of $1.7 million reflects a 10% dip from the prior-year quarter.  

Prior to the first-quarter earnings release, there is lack of any solid catalyst for raising optimism about the company’s business activities and prospects. In fact, the Zacks Consensus Estimate for FFO per share in the soon-to-be-reported quarter was revised 2.4% downward to 81 cents, over the past week. Further, this indicates a decline of 6.9% year over year.

The Zacks Consensus Estimate for first-quarter revenues is pegged at $214.8 million, indicating a year-over-year fall of 13.1%.

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 -0.77%.

Zacks Rank: Macerich has a favorable Zacks Rank of 3.

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:

Realty Income (O - Free Report) , slated to release first-quarter results on May 8, has an Earnings ESP of +0.64% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Retail Properties of America, Inc. (RPAI - Free Report) set to report quarterly numbers on May 1, has an Earnings ESP of +0.67% and a Zacks Rank of 3.

STORE Capital Corporation (STOR - Free Report) ,scheduled to release earnings on May 3, has an Earnings ESP of +0.77% and a Zacks Rank of 3.

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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