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Taubman Centers' (TCO) Q4 FFO and Revenues Beat Estimates

Zacks Equity Research
Updated

Retail real estate investment trust (REIT) Taubman Centers Inc. TCO reported fourth-quarter 2017 adjusted funds from operations (FFO) per share of $1.03 that surpassed the Zacks Consensus Estimate of $1.02. The figure also came 2% above the year-ago tally of $1.01.

Total revenues for the quarter came in at $172.2 million, beating the Zacks Consensus Estimate of $165 million. Revenues were also up 3.6% from the prior-year quarter.

The quarter experienced higher occupancy and rent per square foot, and lower general and administrative expenses.

For full-year 2017, Taubman’s adjusted FFO per share were $3.70, reflecting growth of 3.4% from the year-ago figure of $3.58. Further, it surpassed the Zacks Consensus Estimate by a penny.

Total revenues for the full year came in at $629.2 million, outpacing the Zacks Consensus Estimate of $612.5 million. The figure also grew 2.7% year over year.

Quarter in Detail

Comparable center net operating income (NOI) climbed 0.1% for the quarter. Average rent per square foot in comparable centers came in at $61.35, up 0.6% from the prior-year quarter. For the period ended Dec 31, 2017, the trailing 12-month releasing spreads per square foot were 5%.

Moreover, comparable center mall tenant sales per square foot inched up 3.2% in the quarter. Further, the company’s 12-month trailing comparable center mall tenant sales per square foot was $810, marking an increase of 2.3%.

As of Dec 31, 2017, leased space in comparable centers was 96%. Moreover, ending occupancy in comparable centers was 95% on Dec 31, 2017, reflecting a rise of 0.3% from the prior year.

Liquidity

Taubman Centers exited the fourth quarter with cash and cash equivalents of $42.5 million, up from $40.6 million at year-end 2016.

Guidance

Taubman Centers introduced guidance for 2018. The company projects 2018 FFO per share in the range of $3.72-$3.86. The Zacks Consensus Estimate is pegged at $3.78.

The full-year FFO per share guidance is backed by assumptions of comparable center NOI growth of about 2-3% for the year. Also, the guidance does not include any future costs that may be incurred related to shareowner activism.

Our Viewpoint

The company’s performance is anticipated to be adversely affected by the choppy retail real estate environment. In fact, with a rapid shift in customers’ shopping preferences and growing online purchases, mall traffic continues to suffer. These have made retailers reconsider their footprint and eventually opt for store closures. This is expected to impact demand for retail space at Taubman’s shopping centers. Also, hike in interest rates and unfavorable foreign-currency movements increase its risks.

Nonetheless, the company’s solid retail portfolio, high-quality retailers and diligent restructuring initiatives have the capacity to support its growth in the long term.

Taubman Centers, Inc. Price, Consensus and EPS Surprise

Taubman Centers, Inc. Price, Consensus and EPS Surprise | Taubman Centers, Inc. Quote

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Taubman Centers has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like HCP Inc. HCP, CubeSmart CUBE and EPR Properties EPR. HCP and CubeSmart are scheduled to release results on Feb 13 and Feb 15 respectively, while EPR Properties is slated to report numbers on Feb 28.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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