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Here's Why You Should Hold Ventas (VTR) Stock in Your Portfolio

Zacks Equity Research
·4-min read

Ventas, Inc.’s VTR high-quality senior housing portfolio is well-poised to benefit from the recovery in industry fundamentals. Nonetheless, reduced cash flow due to the sale of assets, and competition with national and local operators are concerning.

With effective vaccine roll-outs, Ventas is seeing emerging positive senior housing operation trends in the United States, with move-ins exceeding the pre-pandemic levels, while move-outs remaining steady. As such, Ventas’ third-quarter spot occupancy grew 110 basis points, sequentially.

Ventas’ office segment, which includes medical office buildings (MOBs), academic medical and research & innovation (R&I) centers, is poised to gain from favorable demographics and growing outpatient trends. The R&I centers are essential for delivering crucial healthcare services and research related to life-saving vaccines and therapeutics.

To capitalize on the growing healthcare-driven research, Ventas is driving its R&I business forward, aided by ground-up developments and asset acquisitions. This healthcare REIT owns R&I centers in major life-science clusters of Cambridge, San Francisco and Maryland, with presence on more than 16 top-tier research university campuses.

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Moreover, long-lease terms, high-quality portfolio and top-rated tenants assure steady growth in cash flows for Ventas. With increased admissions and surgery volumes, demand for MOBs is likely to remain robust, leading to strong near-term leasing.

Ventas also enjoys a healthy balance sheet and is steadily making efforts to enhance its liquidity and financial strength. VTR had $2.2 billion of liquidity as of Nov 3. At the end of third-quarter 2021, its balance sheet enjoyed long-term credit ratings of Baa1 from Moody’s as well as BBB+ from Fitch and S&P Global, providing easy access to debt at favorable costs. With a well-laddered debt maturity profile, Ventas has decent financial flexibility to pursue growth endeavors.

However, Ventas operates in a cut-throat market, and competes with national and local healthcare operators. VTR’s operators contend with peers for occupancy and managinglabor costs. This significantly limits its power to boost profitability and ink deals at attractive rates.

Ventas is making efforts to unlock the value of its assets through opportunistic disposals of non-core assets. Although such efforts enable it to optimize its portfolio quality, better manage financial obligations and reinvest in attractive opportunities, dilution in earnings and reduced cash flows in the near term from the sale of assets are unavoidable.

Shares of this currently Zacks Rank #3 (Hold) Ventas have declined 4.4% year to date against the industry’s growth of 22.1%.

Image Source: Zacks Investment Research

Key Picks

Some better-ranked stocks from the REIT sector are OUTFRONT Media OUT, Cedar Realty Trust CDR and Apple Hospitality REIT APLE.

The Zacks Consensus Estimate for OUTFRONT Media’s 2021 funds from operations (FFO) per share has been raised 13.8% over the past month. OUT flaunts a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the last four quarters, OUTFRONT Media’s FFO per share surpassed the consensus estimate thrice and reported in-line results once, the average surprise being 44.87%. Shares of OUT have inched up 0.8% in the past three months, against the industry’s decline of 2.6%.

The Zacks Consensus Estimate for Cedar Realty Trust’s current-year FFO per share has been raised 2.6% in the past month. CDR currently sports a Zacks Rank of 1.

Over the last four quarters, Cedar Realty’s FFO per share surpassed the consensus estimate on two occasions and missed the mark on the remaining two, the average surprise being 6.40%. Shares of CDR have appreciated 46.3% in the past six months, outperforming the industry’s rally of 4.3%.

The Zacks Consensus Estimate for Apple Hospitality REIT’s 2021 FFO per share has moved 4.9% north in the past month. APLE currently carries a Zacks Rank #2 (Buy).

Over the last four quarters, Apple Hospitality’s FFO per share surpassed the consensus mark thrice and missed the same once, the average negative surprise being 14.2%. Shares of APLE have declined 1.6% in the past three months compared with the industry’s fall of 2.6%.

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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Ventas, Inc. (VTR) : Free Stock Analysis Report

Cedar Realty Trust, Inc. (CDR) : Free Stock Analysis Report

OUTFRONT Media Inc. (OUT) : Free Stock Analysis Report

Apple Hospitality REIT, Inc. (APLE) : Free Stock Analysis Report

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Zacks Investment Research