Balanced View on Taubman - Analyst Blog

On Mar 28, 2014, we issued an updated research report on the retail real estate investment trust (REIT) – Taubman Centers Inc. TCO.

On Feb 12, Taubman reported fourth-quarter 2013 adjusted funds from operations (FFO) per share of $1.11, which rose 11.0% year over year and also came 3.7% ahead of the Zacks Consensus Estimate of $1.07. Quarterly results reflected a rise in rents, lower interest expense and the purchase of an additional stake in International Plaza (Tampa, FL) and Waterside Shops (Naples, FL) in late 2012.

With its solid portfolio of best-in-class retail malls, Taubman is well poised to improve its results in the quarters ahead. Strategic constructions and redevelopments at high-end markets are expected to be accretive to its top line going forward. Also, its healthy balance sheet and cost saving measures are encouraging. Moreover, the recent dividend hike boosts investors' confidence.

Although the portfolio restructuring looks promising going forward, a significant development and redevelopment pipeline increases its operational risks. Furthermore, rising online sales that adversely affect the demand for retail space remains a concern and an anticipated increase in interest rate may dent its financial results, going forward.

Over the last 30 days, the Zacks Consensus Estimate for 2014 FFO per share remained stable at $3.79. Nevertheless, it moved up by a penny to $4.09 for 2015. Consequently, the stock currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Better-ranked stocks in the retail REIT industry include General Growth Properties, Inc GGP, Excel Trust, Inc. EXL and Simon Property Group Inc. SPG. All these stocks carry the Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.