Shares of Macerich MAC have rallied 29.6% over the past three months, outperforming the industry's upside of 1.6%.

Macerich enjoys a portfolio of premium shopping centers in the United States. The company is witnessing healthy demand for its assets as evidenced by its strong leasing activity. Its focus on omnichannel retailing is likely to support its long-term growth. The balance sheet strengthening efforts will likely lower its leverage.

In October 2024, the company acquired its partner’s 40% interest in the Pacific Premier Retail Trust portfolio for $122 million. The portfolio consists of Washington Square, Los Cerritos Center and Lakewood Center.

Factors Behind MAC Stock Price Surge: Will the Trend Last?

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 has been making efforts to enhance its assets’ quality as well as customer relationships through increasing the adoption of the omnichannel model. The omnichannel business model has become crucial among several store retailers resorting to fulfilling orders out of their mall-based stores. Many digital brands are focusing on enhancing their brick-and-mortar presence which is playing a key role in satisfying orders.

With a decent leasing pipeline, Macerich is likely to continue witnessing healthy leasing activity at its properties in the quarters ahead, driving occupancy. During the first three quarters of 2024, the company leased 2.6 million square feet. From the beginning of the year through Sept. 30, 2024, the company has approved new and renewal leases to the tune of 4.3 million square feet, an 85% increase year over year. The portfolio occupancy at the end of the third quarter of 2024 was 93.7%, 30 basis points up year over year.

Further, Macerich’s shift toward reuse 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.

In May 2024, Macerich announced a thorough Path-Forward plan, which is designed to simplify the business, enhance operational performance and strengthen its balance sheet. Additionally, the goal is to enhance and expand Macerich's existing free cash flow generation to nearly $300 million annually.

Key Risks for MAC Stock

Tenant bankruptcies are likely to affect Macerich’s performance in the upcoming quarters. From the beginning of 2024 through Nov. 6, 2024, the company witnessed nine bankruptcy filings from its tenants, totaling 45 leases and representing approximately 312,000 square feet of leased space and $18.4 million of annual leasing revenues at the company’s share. We expect the company’s total revenues to decrease marginally in 2024.

Macerich has a substantially leveraged balance sheet. As of Sept. 30, 2024, its total pro-rata share of debt was approximately $6.78 billion. This leveraged balance sheet limits its strength to withstand any credit crisis and unexpected negative externalities in the future. In addition, the still high interest rate environment is likely to result in high interest expenses for the company, affecting its ability to purchase or develop real estate.

Analysts seem bearish on this retail REIT carrying a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for its 2024 funds from operations (FFO) per share has been lowered marginally to $1.56 over the past month.

Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks from the retail REIT sector are Regency Centers REG and Brixmor Property Group BRX, each 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 Regency Centers’ 2024 FFO per share is pegged at $4.27, up 2.9% year over year.

The Zacks Consensus Estimate for Brixmor Property Group’s2024 FFO per share is pegged at $2.14, up 4.9% year over year.

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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