We have issued an updated research report on Taubman Centers, Inc. TCO on May 25, 2015. The company’s dominant retail malls, located in major metropolitan areas, enjoys high average sales productivity in the U.S. The firm also announced a rise in its ownership stake to 95% from 80% in The Mall of San Juan, Puerto Rico in April. The move comes as a strategic fit given the solid value of the property.
Taubman Centers, in fact, boasts a high-quality roster of national retailers such as Forever 21, The Gap, Inc. GPS and Abercrombie & Fitch Co. ANF, which ensures a steady source of rental revenues. Also, dividend hike and share repurchase boost investors’ confidence in the stock.
Last month, the company came up with first-quarter 2015 funds from operations (“FFO”) per share of 81 cents, which beat the Zacks Consensus Estimate of 74 cents but fell 10% from the year-ago tally of 90 cents. Revenue growth was under pressure with the top line falling 26.2% year over year but marginally exceeding the Zacks Consensus Estimate in the first quarter.
We believe that though this retail real estate investment trust’s (“REIT”) disposition moves are a strategic fit, such measures tend to dilute earnings in the near term. Also, stiff competition, growing online sales and an anticipated rise in interest rates remain as concerns.
Echoing similar sentiments, over the last 30 days, the Zacks Consensus Estimate for 2015 FFO per share increased a cent to $3.24, while that for 2016 remained unchanged at $3.55. The stock currently carries a Zacks Rank #3 (Hold).
Stock to Consider
A better-ranked stock in the same sector is Cedar Realty Trust, Inc. CDR, with a Zacks Rank #2 (Buy).
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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