Retail REIT – The Macerich Company (NYSE:MAC) – came up with second-quarter 2017 funds from operations (FFO) per share of 98 cents, surpassing the Zacks Consensus Estimate of 94 cents. The prior-year quarter’s FFO per share figure was $1.02. The quarter witnessed modest improvement in same-center net operating income (NOI).
The company posted revenues of $247.4 million for the quarter, surpassing the Zacks Consensus Estimate $227.7 million. However, it came in 4.8% lower than the prior-year quarter figure.
Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share.
Quarter in Detail
As of Jun 30, 2017, mall portfolio occupancy contracted 60 basis points (bps) year over year to 94.4%. Mall tenant annual sales increased to $646 per square foot from $626 at the end of second-quarter 2016. Re-leasing spreads increased 18.5% on a year-over-year basis. Also, same-centers net operating income grew around 3.3% from the prior-year comparable period.
As of Jun 30, 2017, Macerich’s cash and cash equivalents were $87.1 million, declining from $94 million as of Dec 31, 2016.
Share Repurchase Activity
Taking advantage of the price dislocation in the markets, Macerich repurchased and retired 687,494 shares at an average price of $59.09.
2017 Guidance
Macerich has reaffirmed its guidance for 2017. The retail REIT expects FFO per share in the range of $3.90–$4.00 for the year. Currently, the Zacks Consensus Estimate for 2017 FFO is pegged at $3.95 per share.
Our Viewpoint
Increasing consumer purchases through the Internet have become a pressing concern for retail REITs, including Macerich. Also, concentration risk arising from the company’s significant positions in California, New York and Arizona may weigh upon its earnings in times of economic uncertainty. Further, hike in interest rates remains a concern for the company.
Nevertheless, Macerich enjoys a premium portfolio and a presence of well-capitalized tenants in its roster.
Currently, Macerich has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Macerich’s shares have lost nearly 21.6% year to date compared with a 4.8% decline of the industry it belongs to.
We now look forward to the earnings releases of Hospitality Properties Trust (NASDAQ:HPT) , Global Net Lease, Inc. (NYSE:GNL) and Apple (NASDAQ:AAPL) Hospitality REIT, Inc. (NYSE:APLE) , 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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