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Will Macerich Stay on Growth Path with Portfolio Tuning Plan?

Zacks Equity Research

The Macerich Company (MAC) has been focusing on an aggressive capital-recycling program, which involves the divestiture of non-core and slower-growth assets and usage of the proceeds in higher-growth properties through acquisitions, developments and redevelopment initiatives. The company aims toward enhancing its ties with customers.

Also, Macerich’s premium operating portfolio, increasing mall tenant annual sales per square foot and re-leasing spreads look promising for the company’s growth. Further, improving consumer confidence is expected to drive demand for retail goods and hence, amid lower supply of new properties, steadily rising demand for retail real estates is shaping up as the sector’s growth driver.

Encouragingly, leaving behind the property-cost woes tied to the cold winters in the first quarter, Macerich came up with an earnings beat in second-quarter 2014. In July, the company reported FFO per share of 86 cents, exceeding the Zacks Consensus Estimate by 2 cents. However, on a year-over-year basis, FFO per share were down by a penny, while revenues fell 3.3%.

Macerich’s geographic concentration of assets and stiff competition are headwinds for its growth going forward. Furthermore, rising online sales that adversely affect the demand for retail space remains a concern and an anticipated increase in the interest rate may dent the financial results in the future.

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To gain deeper insight into Macerich, you can refer to our updated research report, which was issued on Sep 11, 2014.

Over the last 60 days, the Zacks Consensus Estimate for FFO per share for 2014 upped by a penny to $3.57. However, for 2015 it remained stable at $3.80. The stock carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Better-ranked stocks in the REIT industry include Retail Properties of America, Inc. (RPAI), Rouse Properties, Inc. (RSE) and Regency Centers Corp. (REG). All these stocks carry a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.

Read the Full Research Report on MAC
Read the Full Research Report on REG
Read the Full Research Report on RPAI
Read the Full Research Report on RSE


Zacks Investment Research