The Macerich Company MAC is scheduled to report second-quarter 2018 results on Aug 1, after the market closes. Its funds from operations (FFO) per share and revenues are anticipated to decline year over year.
In the last reported quarter, this retail real estate investment trust (REIT) delivered a positive surprise of 1.23% in terms of FFO per share. Results highlighted growth in re-leasing spreads and average rent per square foot. However, the company recorded lower portfolio occupancy.
Over the trailing four quarters, Macerich beat estimates on two occasions for as many misses, resulting in an average beat of 0.64%. This is depicted in the chart below:
Macerich Company Price and EPS Surprise
Let’s see how things are shaping up for this announcement.
Factors That Might Influence Q2 Results
In the retail real estate space, store closures and retailers bankruptcies continue to rule the market. The national retail vacancy rate marginally increased to 10.2% in the second quarter, underlining store closures of bankrupt toy retailer — Toys “R” Us Inc. — per data from Reis, while national average asking rents edged 0.2% higher.
Macerich is making concerted efforts to enhance its asset quality and customer relationships. Its increasing adoption of the omni-channel model in retailing is aimed at improving shopping experience and driving sales volume at tenant stores, thereby, raising demand for Macerich’s properties.
However, despite the company resorting to different strategies, mall traffic continues to remain considerably depressed with consumers increasingly opting for online purchases. This has led to a rising number of retailers joining the dot-com bandwagon. In fact, the first half of the year witnessed several preeminent retail bankruptcy filings and record-high defaults by retail corporates.
The Zacks Consensus Estimate for second-quarter revenues is pegged at $214.2 million, indicating a year-over-year fall of 13.4%. Minimum rental revenues are expected to have registered a fall of 5.9% year over year to $144 million.
Moreover, prior to the second-quarter earnings release, there is lack of any solid catalyst for raising optimism about the company’s business activities and prospects. As such, the Zacks Consensus Estimate for the quarter’s FFO per share has remained unchanged at 96 cents, over the past month. This indicates a decline of 2.0% year over year.
Earnings Whispers
Our proven model does not conclusively show that Macerich will likely beat estimates this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. However, that is not the case here as you will see below.
(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.)
Earnings ESP: The Earnings ESP for Macerich is -0.65%.
Zacks Rank: Macerich has a Zacks Rank of 4 (Sell).
Stocks That Warrant a Look
Here are a few stocks in the REIT sector that you may want to consider as our model shows that these have the right combination of elements to report a positive surprise this quarter:
Extra Space Storage Inc. EXR, slated to release April-June quarter results on Jul 31, has an Earnings ESP of +0.80% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chatham Lodging Trust CLDT, scheduled to release quarterly figures on Aug 1, has an Earnings ESP of +1.14% and a Zacks Rank #3.
HCP, Inc. HCP, set to report Q2 numbers on Aug 2, has an Earnings ESP of +0.60% and carries a Zacks Rank of 3.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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