Retail real estate investment trust (“REIT”) The Macerich Company MAC is expected to report fourth-quarter and full-year 2015 results on Feb 3, 2016, after the market close. Last quarter, the company had delivered a 3.06% positive surprise.
For the trailing 4 quarters, Macerich posted an average positive surprise of 3.58%, beating estimates on all occasions. The Zacks Consensus Estimate for the fourth quarter funds from operations (“FFO”) per share is currently pegged at $1.09.
Let’s see how things have shaped up for this announcement.
Factors to Consider
Macerich boasts a high concentration of premium malls in the dynamic U.S. markets that have performed relatively well over the past quarters, enabling the company to maintain a stable source of rent.
Moreover, a recovering economy, along with a better employment scenario, is expected to drive demand for retail goods. Hence, we believe this signifies an opportune moment for Macerich for providing real estate support to retail sector. In fact, amid lower supply of new properties, steadily rising demand is emerging as the sector’s primary growth driver. All these are expected to be reflected in the company’s fourth-quarter 2015 results.
However, with increasing number of customers gravitating toward online shopping, the retail REITs are presently faced with challenges. As a result, several retail REITs, including Macerich, are incurring additional expenses for exploring omni-channel routes.
During the fourth quarter, Macerich’s performance was inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the stock has remained stable at $1.09 per share over the last 7 days.
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.
Negative Zacks ESP: The Most Accurate Estimate and the Zacks Consensus Estimate currently stand at $1.08 and $1.09, respectively, which translate into an Earnings ESP of -0.92%.
Zacks Rank #3: Macerich’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP as well to be confident about an earnings surprise.
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 a few stocks in the REIT sector you may want to consider instead, as our model shows that they have the right combination of elements to post a positive surprise this quarter:
Vornado Realty Trust VNO has an Earnings ESP of +4.65% and a Zacks Rank #2. The company will release results on Feb 16.
Healthcare Realty Trust Incorporated HR has an Earnings ESP of +2.44% and a Zacks Rank #2. The company will report on Feb 16.
CubeSmart CUBE has an Earnings ESP of +3.13% and a Zacks Rank #2. The company will report fourth-quarter results on Feb 18.
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. All earnings per share numbers presented in this write up represent FFO per share.
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