Macerich (MAC) To Report Q3 Earnings: What To Expect?

Retail real estate investment trust (“REIT”) The Macerich Company (NYSE:MAC) is expected to report third-quarter 2016 results on Oct 27, 2016, after the market closes. Last quarter, the company had delivered a 5.15% positive surprise.

For the trailing four quarters, Macerich posted an average positive surprise of 3.61%, beating estimates on all occasions. The Zacks Consensus Estimate for the third quarter funds from operations (“FFO”) is currently pegged at $1.04.

Let’s see how things have shaped up for this announcement.

MACERICH CO Price and EPS Surprise

MACERICH CO Price and EPS Surprise | MACERICH CO Quote

Factors to Consider

Santa Monica, CA-based Macerich enjoys a portfolio of premium malls in the vibrant U.S. markets. Further, the presence of well-capitalized retailers in its roaster enabled the company to maintain a stable source of rent over the past quarters.

Per the latest CBRE Group, Inc. (NYSE:CBG) study, during the third quarter, average availability of retail space was 10.4%, down 20 basis points sequentially. However, demand for retail space in the country continues to grow as new construction remains relatively muted and retailers are combining their online and bricks-and-mortar operations. This indicates the continuation of a gradual, five-year recovery in the U.S. retail-property market.

However, apart from competing with other retail properties, Macerich faces competition from alternative retail channels such as catalogs and e-Commerce websites. Moreover, substantial assets concentration in California and Arizona and any rise in interest rate are concerns before the company.

Earnings Whispers

Our proven model does not conclusively show that Macerich will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the percentage difference between the Most Accurate Estimate of $1.03 and the Zacks Consensus Estimate of $1.04, is -0.96%.

Zacks Rank: Macerich’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings beat.

Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are two other REITs that you may want to consider as our model shows that they also have the right combination of elements to post an earnings beat this quarter:

Post Properties Inc. (NYSE:PPS) , slated to release earnings results on Oct 31, has an Earnings ESP of +1.24% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Armada Hoffler Properties, Inc. (NYSE:AHH) , slated to release earnings results on Nov 1, has an Earnings ESP of +4.17% and a Zacks Rank #3.

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