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Taubman (TCO) Down 7.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Taubman Centers (TCO - Free Report) . Shares have lost about 7.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Taubman due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Taubman Centers' Q3 FFO & Revenues Miss Estimates

Taubman Centers reported third-quarter 2019 FFO per share of 88 cents, missing the Zacks Consensus Estimate of 89 cents.  

Decline in comparable center NOI and rise in interest expense unfavorably impacted the results. However, higher ending occupancy in comparable centers provided some support.

Moreover, adjusted revenues, including rental revenues and overage rents for consolidated businesses, came in at around $145.1 million, missing the Zacks Consensus Estimate of $147.2 million. Nonetheless, the reported figure inched up 1.7% year over year.

Quarter in Detail

Comparable center NOI (excluding lease cancellation income and using constant foreign exchange rates) edged down 0.9% year over year. For the period ended Sep 30, 2019, the trailing 12-month releasing spread per square foot was down 1%.

Comparable tenant sales per square foot increased 11.2%, year over year. Trailing 12-month sales per square foot of $868 was up 12% as compared with the same period ended Sep 30, 2018. Also, average rent per square foot for the quarter was $56.03, marking 2.3% increase from $54.77 in the year-ago period.

As of Sep 30, 2019, leased space in comparable centers was 95.9%, inching up 0.1% from Sep 30, 2018. Additionally, ending occupancy in comparable centers of 93.4% at the end of the reported quarter was up 0.1% year over year.

Notably, in September, Taubman Centers closed the sale of Taubman Asia’s 50% stake in Starfield Hanam, located in Hanam, South Korea, to real estate funds managed by The Blackstone Group Inc., for $300 million. Subsequent to the sale, Taubman now owns a 17.15% interest in the property. The company received net proceeds of about $240 million, which was used to pay its debt.

Liquidity

Taubman Centers exited third-quarter 2019 with cash and cash equivalents of $62.6 million, up from the $48.4 million reported at the end of December 2018.

Guidance

The company has revised its projections for 2019 FFO per share to $3.49-$3.59 from the prior range of $3.47-$3.57. However, adjusted FFO, which excludes 15 cents per share of year-to-date adjustments, remained unchanged at $3.64-$3.74.

The comparable-center NOI growth is projected to be flat to 1%, down from the previous guidance of 2%. This reduction in projection can be primarily attributed to unfavorable foreign-currency exchange rates and elevated tenant bankruptcies.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Taubman has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Taubman has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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