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Can Macerich (MAC) Maintain its Beat Streak in Q3 Earnings?

The Macerich Company MAC — a retail real estate investment trust (REIT) — is scheduled to report third-quarter 2017 results on Oct 30, after the market closes. While its funds from operations (FFO) per share are anticipated to be up year over year, revenues might record a decline.

Last quarter, the company reported FFO per share of 98 cents, beating the Zacks Consensus Estimate by 4.3%.

Over the trailing four quarters, Macerich beat estimates in three occasions and posted in-line results in the other, generating an average positive beat of 2.17%.

Macerich Company (The) Price and EPS Surprise
 

However, the stock has lost 20% year to date, underperforming the 6.3% loss incurred by the industry it belongs to.




Note: All EPS numbers presented in this write-up represent funds from operations (FFO) per share.

Factors That Might Influence Q3 Results

Macerich enjoys a portfolio of premium malls in vibrant U.S. markets. The presence of a number of well-capitalized retailers on its roster has enabled the company to maintain a stable source of rent for the past few quarters. Additionally, Macerich’s omni-channel distribution model, steadily rising demand, along with its tempered supply and aggressive capital-recycling program, augur well for growth.

However, rising consumer purchases through the Internet has emerged as a pressing concern for this retail REIT. These have made retailers reconsider their footprint and eventually opt for store closures. Also, retailers not able to cope with competition have been filing bankruptcies.

Subsequently, the company’s revenues from minimum rent will likely experience a marginal fall as compared to the prior quarter. The company realizes minimum rents on a straight-line basis. The Zacks Consensus Estimate for third-quarter minimum rental revenues is currently pegged at $151 million. This indicates a 1.3% decline on a year-over-year basis.  

Percentage rents, which is realized when tenants' sales targets have been met, is also anticipated to witness a steep year-over-year decline due to the tepid retail environment. The Zacks Consensus Estimate of $2.57 million reflects a 33.6% plunge as compared to the prior-year quarter.   

Macerich’s activities during the quarter were inadequate to gain analysts’ confidence. Consequently, the Zacks Consensus Estimate for Q3 FFO remained unchanged at 98 cents over the past month.

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.)

Zacks ESP: The Earnings ESP for Macerich is 0.00%.

Zacks Rank: Macerich has a Zacks Rank #3. This increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

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:

CoreSite Realty Corporation COR, slated to release third-quarter results on Oct 26, has an Earnings ESP of +1.01% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ventas, Inc. VTR, scheduled to report quarterly numbers on Oct 27, has an Earnings ESP of +0.12% and a Zacks Rank of 3.

Boston Properties, Inc. BXP, slated to release third-quarter earnings on Nov 1, has an Earnings ESP of +0.39% and a Zacks Rank of 3.
 
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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Macerich Company (The) (MAC): Free Stock Analysis Report
 
Ventas, Inc. (VTR): Free Stock Analysis Report
 
Boston Properties, Inc. (BXP): Free Stock Analysis Report
 
CoreSite Realty Corporation (COR): Free Stock Analysis Report
 
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