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Is it Wise to Retain Macerich Stock in Your Portfolio Now?
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The Macerich Company (MAC - Free Report) , with a decent leasing pipeline, is likely to continue witnessing healthy leasing activity at its properties in the quarters ahead, driving occupancy. Its focus on omnichannel retailing is likely to support its long-term growth. However, growing e-commerce adoption by consumers raises concerns for the company. It also has a substantially leveraged balance sheet and this remains a headwind.
What’s Aiding MAC?
Macerich has a high concentration of premium malls in vibrant U.S. markets. These properties are located in densely-populated areas, where affluent consumers with significant disposable incomes live and play, offering the company solid scope to generate decent cash flows. Macerich’s decent number of well-capitalized retailers in its tenant roster and well-laddered lease maturity schedule help it well to navigate through any challenging times.
MAC has been making efforts to enhance its asset quality as well as customer relationships through the increasing adoption of the omni-channel model, a popular choice among several store retailers. This is likely to pay off well. Further, the shift toward re-use and mixed-use properties through recapture and repositioning of anchor tenants remains a key emphasis, while bringing brands to new markets at its mall will likely attract shoppers.
Macerich has been focusing on an aggressive capital-recycling program, which involves the divestiture of non-core and slower-growth assets and the usage of the proceeds to increase its presence in core markets and invest in higher-growth properties through acquisitions, developments and redevelopment initiatives.
Strategic dispositions made over the years have helped reduce impending bankruptcy issues across the lower-quality disposed portfolio. For 2024, Macerich expects to incur approximately $160-$180 million for development, redevelopment, expansion and renovations.
What’s Hurting MAC?
Given the conveniences of online shopping, growing e-commerce adoption may weigh on Macerich’s prospects. Online retailing is likely to remain a popular choice among customers, thus adversely impacting the market share for brick-and-mortar stores.
Macerich’s performance in the upcoming quarters is expected to be negatively impacted by factors such as macroeconomic choppiness and the impact of the seven bankruptcies, including Express, filed in the second quarter of 2024. The company expects 10 Express locations to close in the third quarter, resulting in a 40-basis-point decrease in its portfolio occupancy. We expect the company’s total revenues to decrease marginally in 2024.
Macerich has a substantially leveraged balance sheet. As of June 30, 2024, its total pro-rata share of debt was approximately $6.99 billion, with a weighted average interest rate of 5.34%. Depending on the company’s transaction success for the balance of the year, it expects to reduce leverage to the low 8X range by the end of 2024. This leveraged balance sheet limits its strength to withstand any credit crisis and unexpected negative externalities in the future.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 12.6% compared with the industry's upside of 16.6%. The Zacks Consensus Estimate for 2024 and 2025 FFO per share have been revised marginally downward over the past month, indicating analysts’ bearish sentiments.
The Zacks Consensus Estimate for SKT’s 2024 FFO per share stands at $2.09, indicating an increase of 6.6% from the year-ago reported figure.
The Zacks Consensus Estimate for BRX’s 2024 FFO per share is pinned at $2.13, suggesting year-over-year growth of 4.4%.
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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Is it Wise to Retain Macerich Stock in Your Portfolio Now?
The Macerich Company (MAC - Free Report) , with a decent leasing pipeline, is likely to continue witnessing healthy leasing activity at its properties in the quarters ahead, driving occupancy. Its focus on omnichannel retailing is likely to support its long-term growth. However, growing e-commerce adoption by consumers raises concerns for the company. It also has a substantially leveraged balance sheet and this remains a headwind.
What’s Aiding MAC?
Macerich has a high concentration of premium malls in vibrant U.S. markets. These properties are located in densely-populated areas, where affluent consumers with significant disposable incomes live and play, offering the company solid scope to generate decent cash flows. Macerich’s decent number of well-capitalized retailers in its tenant roster and well-laddered lease maturity schedule help it well to navigate through any challenging times.
MAC has been making efforts to enhance its asset quality as well as customer relationships through the increasing adoption of the omni-channel model, a popular choice among several store retailers. This is likely to pay off well. Further, the shift toward re-use and mixed-use properties through recapture and repositioning of anchor tenants remains a key emphasis, while bringing brands to new markets at its mall will likely attract shoppers.
Macerich has been focusing on an aggressive capital-recycling program, which involves the divestiture of non-core and slower-growth assets and the usage of the proceeds to increase its presence in core markets and invest in higher-growth properties through acquisitions, developments and redevelopment initiatives.
Strategic dispositions made over the years have helped reduce impending bankruptcy issues across the lower-quality disposed portfolio. For 2024, Macerich expects to incur approximately $160-$180 million for development, redevelopment, expansion and renovations.
What’s Hurting MAC?
Given the conveniences of online shopping, growing e-commerce adoption may weigh on Macerich’s prospects. Online retailing is likely to remain a popular choice among customers, thus adversely impacting the market share for brick-and-mortar stores.
Macerich’s performance in the upcoming quarters is expected to be negatively impacted by factors such as macroeconomic choppiness and the impact of the seven bankruptcies, including Express, filed in the second quarter of 2024. The company expects 10 Express locations to close in the third quarter, resulting in a 40-basis-point decrease in its portfolio occupancy. We expect the company’s total revenues to decrease marginally in 2024.
Macerich has a substantially leveraged balance sheet. As of June 30, 2024, its total pro-rata share of debt was approximately $6.99 billion, with a weighted average interest rate of 5.34%. Depending on the company’s transaction success for the balance of the year, it expects to reduce leverage to the low 8X range by the end of 2024. This leveraged balance sheet limits its strength to withstand any credit crisis and unexpected negative externalities in the future.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 12.6% compared with the industry's upside of 16.6%. The Zacks Consensus Estimate for 2024 and 2025 FFO per share have been revised marginally downward over the past month, indicating analysts’ bearish sentiments.
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Stocks to Consider
Some better-ranked stocks from the retail REIT sector are Tanger Inc. (SKT - Free Report) and Brixmor Property Group (BRX - Free Report) , each currently carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for SKT’s 2024 FFO per share stands at $2.09, indicating an increase of 6.6% from the year-ago reported figure.
The Zacks Consensus Estimate for BRX’s 2024 FFO per share is pinned at $2.13, suggesting year-over-year growth of 4.4%.
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.