Macerich (MAC) Q3 FFO Misses Estimates, Revenues Beat

Retail REIT The Macerich Company (NYSE:MAC) delivered third-quarter 2018 funds from operations (FFO) per share (excluding costs related to shareholder activism) of 99 cents, a penny below the Zacks Consensus Estimate. However, the figure came in higher than the prior-year tally of 96 cents.

Results reflect occupancy uptick, higher tenant sales, as well as improving same-center earnings. During the quarter, the company also announced a 50/50 joint venture with Simon Property Group (NYSE:SPG) for creating the Los Angeles Premium Outlets.

The company posted adjusted revenues of $217.6 million for the quarter, surpassing the Zacks Consensus Estimate of $217.2 million. However, the figure came in 1.4% lower than the prior-year figure.

Quarter in Detail

As of Sep 30, 2018, mall portfolio occupancy expanded 80 basis points (bps) year over year to 95.1%. Mall tenant annual sales increased 7.3% year over year to $707 per square feet. Re-leasing spreads for the year ended Sep 30, 2018, increased 10.8%. Average rent per square foot ascended 3.9% to $59.09 from $56.88 as of Sep 30, 2017.

Also, same-center net operating income for the reported quarter climbed 3.7% from the comparable period last year.

As of Sep 30, 2018, Macerich’s cash and cash equivalents summed $93.5 million, up from $91 million reported as of Dec 31, 2017.

Guidance

Macerich narrowed its guidance for 2018. The retail REIT expects FFO per share, excluding costs related to shareholder activism, of $3.82-$3.87, compared with the earlier outlook of $3.82-$3.92. Currently, the Zacks Consensus Estimate for full-year FFO per share is pegged at $3.86.

The company lowered its same-center NOI growth rate projection of 1.2-1.7%, assuming a fourth-quarter range of 3-3.5%.

Our Viewpoint

Macerich is poised for growth with the concentration of premium malls in vibrant markets, well-capitalized tenants, adoption of omni-channel model and steadily rising demand from legacy retailers, entertainment uses, restaurants and digitally native brands. The company is repurposing properties, as well as improving its merchandizing mix.

Nevertheless, despite the company resorting to different strategies in a bid to improve asset quality, shrinking footfall amid shift of consumers toward online channels, store closures and bankruptcy of retailers are expected to affect its performance in the near term. Also, hike in interest rates remains another concern.

Macerich currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Macerich Company (The) Price, Consensus and EPS Surprise

We, now, look forward to the earnings releases of Lamar Advertising Company (NASDAQ:LAMR) , Host Omega Healthcare Investors, Inc. (NYSE:OHI) and Outfront Media Inc. (NYSE:OUT) , all of which are scheduled to report their quarterly numbers next week.

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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