Macerich (MAC) Shares Down 11.6% Since Last Earnings Report: Is a Rebound Possible?

It’s been about a month since Macerich’s (MAC) last earnings report, with shares down about 11.6% in that time, underperforming the S&P 500.

Will the recent negative trend continue into its next earnings release, or is Macerich poised for a breakout? Before we dive into how investors and analysts have reacted recently, let’s take a quick look at the latest earnings report to better understand the important catalysts.

Macerich’s Q2 FFO beats estimates, leasing revenues fall

Macerich delivered second-quarter 2019 FFO per share, excluding losses from debt extinguishment and shareholder activation charges, of 88 cents, beating the Zacks Consensus Estimate of 86 cents. However, the figure compared unfavorably to the year-ago quarter’s 96 cents.

The company reported strong growth in tenant sales, as well as increases in average rents and buyout spreads, while occupancy declined. While rental revenue fell short of expectations, same-center NOI growth helped its results.

In fact, the company generated leasing revenues of $211 million during the quarter, missing the Zacks Consensus Estimate of $217.5 million. The figure also declined 2.8% year over year.

Behind the headline numbers

As of June 30, 2019, the shopping mall portfolio occupancy rate decreased by 20 basis points (bps) year-over-year to 94.1%. Annualized mall tenant sales for the 12 months ended June 30, 2019 increased by 12.1% year-over-year to $776 per square foot. Release spreads increased by 9.4% for the 12 months ended June 30, 2019. Average rent per square foot increased by 4% to $61.17 from $58.84 at June 30, 2018. Additionally, same-center net operating income (excluding lease termination revenue) increased by 0.9% compared to the prior-year quarter.

In addition, the company obtained loan financing for $476 million at an average interest rate of 4.19%, resulting in a surplus of $112 million in borrowings.

Perspectives

Macerich reiterated its 2019 guidance. The REIT expects FFO per share to be $3.50-$3.58 this year.

How have estimates changed since then?

Over the past month, investors have witnessed a downward trend in new estimates.

VGM Results

Macerich currently has a weak Growth Score of F, a grade with the same rating on the momentum front. However, the stock has been given a grade of C on the value side, which puts it in the middle 20% for this investment strategy.

Overall, the stock has a Composite VGM Score of F. If you’re not focused on a single strategy, this rating should interest you.

Perspectives

The stock’s estimates are trending lower, and the magnitude of these revisions indicates a downward shift. Interestingly, Macerich has a Zacks Rank #3 (Hold). We expect the stock to deliver consistent returns over the next few months.

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