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Ventas (VTR) to Post Q1 Earnings: Is a Beat in the Cards?

Ventas, Inc. VTR is scheduled to report first-quarter 2023 results on May 8, after market close. While the company’s quarterly results are likely to display year-over-year revenue growth, funds from operations (FFO) per share might reflect a decline.

In the last reported quarter, this Chicago, IL-based healthcare real estate investment trust (REIT) delivered normalized FFO per share of 73 cents, beating the Zacks Consensus Estimate by a whisker. The quarterly results reflected better-than-anticipated revenues. Also, the same-store net operating income (NOI) for the senior housing operating portfolio (SHOP) improved year over year on strong pricing power and occupancy growth.

Ventas’ normalized FFO per share surpassed the Zacks Consensus Estimate in two of the trailing four quarters and met the same in the other two, the average beat being 1.00%. The graph below depicts this surprise history:

Ventas, Inc. Price and EPS Surprise

Ventas, Inc. price-eps-surprise | Ventas, Inc. Quote

Factors at Play

Ventas’ first-quarter earnings are likely to have benefited from the improving operating fundamentals of the healthcare real estate industry.

The company’s SHOP segment, which refers to its senior housing communities in the United States, Canada and the United Kingdom, is likely to have experienced a healthy net move in activity during the first quarter. Also, a favorable construction starts pipeline is expected to have boosted occupancy levels.

In addition, strong pricing power and moderating operating expenses in the company’s SHOP portfolio are likely to have driven net operating income growth for this segment.

The above-mentioned factors, coupled with the increased healthcare expenditure by the rapidly growing senior citizen population, are anticipated to have aided VTR’s SHOP’s overall performance during the first quarter.

The Zacks Consensus Estimate for first-quarter resident fees and services is pegged at $689.5 million, suggesting an increase from $674.1 million reported in the prior quarter and $651.1 million in the year-ago period. Our estimate for the same suggests a rise of 3.7% year over year.

The life-science industry has been benefiting from the increasing life expectancy of the United States population and biopharma drug development growth opportunities.

As a result, higher demand for life science real-estate assets is expected to have driven demand for Ventas’ life-science research & innovation portfolio, leading to healthy leasing activity during the first quarter.  

The consensus mark for the first-quarter rental income from its office buildings stands at $200.3 million, indicating a marginal fall from the prior-year quarter’s reading. Rental income from its triple-net leased portfolio is pegged at $148.5 million, suggesting a fall from $151.6 million reported in the year-ago quarter.

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $1.05 billion, implying a 2.9% increase from the prior-year quarter’s reported figure.

Ventas is expected to have maintained a robust balance sheet during the first quarter, supporting its accretive acquisitions and development activities.

However, higher interest expenses and adverse foreign currency movements might have cast a pall on the company’s performance during the quarter. We expect first-quarter 2023 interest expenses to rise 15.9% year over year.

The Zacks Consensus Estimate for the same has been unchanged at 70 cents in the past month. Moreover, it implies a fall of 11.4% from the year-ago quarter’s figure.

What Our Quantitative Model Predicts

Our proven model predicts a surprise in terms of FFO per share for Ventas this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. That is just the case here.

Earnings ESP: Ventas has an Earnings ESP of +1.07%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: VTR currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Healthpeak Properties, Inc. PEAK reported first-quarter 2023 FFO as adjusted per share of 42 cents, in line with the Zacks Consensus Estimate. The reported figure, however, fell short of the year-ago quarter’s 43 cents.

PEAK’s results reflected better-than-anticipated revenues. Moreover, improvement in same-store portfolio cash (adjusted) NOI was witnessed across the portfolio. The company reaffirmed its 2023 outlook for FFO as adjusted per share.

Welltower Inc.’s WELL first-quarter 2023 normalized FFO per share of 85 cents surpassed the Zacks Consensus Estimate of 82 cents. It also beat our estimate of 81 cents for the quarter. The reported figure improved 3.7% from the prior-year quarter’s actual.

WELL’s results reflected better-than-anticipated revenues. The total same-store net operating income (SSNOI) increased year over year, driven by SSNOI growth in the seniors housing operating (SHO) portfolio. The company also raised its guidance for 2023 FFO per share.

Mid-America Apartment Communities, Inc. MAA, commonly referred to as MAA, reported first-quarter 2023 core FFO per share of $2.28, surpassing the Zacks Consensus Estimate of $2.25. Moreover, the reported figure climbed 15.7% year over year.

This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. MAA also raised its outlook for 2023 core FFO per share.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.

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