Scotiabank downgrades Macerich Company to underperform due to disappointing first-quarter earnings and operational challenges.
Lower Funds From Operations (FFO) per share reported, indicating operational inefficiencies within Macerich.
Macerich faces challenges from tenant bankruptcies and shifts in consumer behavior towards e-commerce, impacting its financial health.
Scotiabank’s recent downgrade of Macerich Company (NYSE:MAC) to Underperform from its previous rating, which was not disclosed, reflects a significant shift in the bank’s perspective towards the real estate investment trust (REIT). This adjustment, reported by TheFly, came into effect on Friday, May 17, 2024, when MAC was trading at $16.07. Macerich, known for its ownership and operation of shopping centers in the United States, faces a challenging landscape in the retail sector, which has been undergoing rapid changes due to shifts in consumer behavior and the rise of e-commerce.
The downgrade by Scotiabank follows Macerich’s first-quarter earnings report for 2024, which revealed a performance that did not meet expectations. The company reported lower Funds From Operations (FFO) per share compared to both the previous year and its own guidance. FFO is a key metric used to assess the performance of REITs, as it provides a clearer picture of the company’s operational efficiency by excluding the effects of depreciation and amortization. The disappointing FFO figures suggest that Macerich is grappling with operational challenges that are impacting its financial health.
These operational challenges are further highlighted by the bankruptcy of Express, a significant tenant, and increased extraordinary costs. Additionally, Macerich’s strategic shift in capital allocation indicates the company is attempting to navigate through these difficulties by possibly investing in more lucrative opportunities or shoring up its financial position. Despite these setbacks, the earnings report hints at a potentially promising future for Macerich, suggesting that the company may have plans in place to recover from its current predicaments or capitalize on strategic successes.
On the day of the downgrade, MAC’s stock saw a slight increase of $0.14, or approximately 0.88%, to close at $16.07. This movement occurred within a trading session that saw the stock fluctuate between $15.98 and $16.2171. Over the past year, MAC’s shares have experienced significant volatility, reaching a high of $17.69 and a low of $9.05. With a market capitalization of approximately $3.47 billion and a trading volume of 2,181,243 shares, Macerich’s stock performance reflects the broader challenges and uncertainties facing the retail real estate sector.
