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Why Is Welltower (WELL) Up 5.8% Since Last Earnings Report?

It has been about a month since the last earnings report for Welltower (WELL). Shares have added about 5.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Welltower due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Welltower Q1 FFO Beat Estimates, Same Store NOI Rises

Welltower’s first-quarter 2024 normalized FFO per share of $1.01 surpassed the Zacks Consensus Estimate of 94 cents. The reported figure improved 18.8% year over year.

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Results reflected better-than-anticipated revenues. The total portfolio SSNOI increased year over year, driven by SSNOI growth in the SHO portfolio. The company also raised its guidance for 2024.

Welltower recorded revenues of $1.86 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.81 billion. Moreover, the top line increased 19.2% year over year.

Quarter in Detail

The SHO portfolio’s same-store revenues increased 10.3% year over year, backed by a 340-basis point uptick in average occupancy and Revenue per Occupied Room (’RevPOR’) growth of 4.8%.

In the first quarter, property operating expenses increased 14.5% to $1.1 billion year over year.

The company’s total portfolio of SSNOI grew 12.9% year over year, supported by SSNOI growth in its SHO portfolio of 25.5%.

Welltower’s pro-rata gross investments in the first quarter totaled $449 million. This included $208 million in acquisitions and loan funding and $241 million in development funding. It opened 10 development projects for a pro-rata investment amount of $166 million. Welltower also completed pro-rata property dispositions and loan payoffs of $107 million in the quarter.

Balance Sheet Position

As of Mar 31, 2024, the company had $6.5 billion of available liquidity, comprising $2.5 billion of available cash and restricted cash, and full capacity under its $4 billion line of credit.

2024 Guidance Raised

Welltower now projects 2024 normalized FFO per share of $4.02-$4.15, up from the prior-guided range of $3.94-$4.10.

Welltower’s guidance now assumes the average blended SSNOI growth of 9-12%, comprising 17-22% growth in Seniors Housing Operating, 2.5-4.0% in Seniors Housing Triple-net, 2-3% in Outpatient Medical and 2-3% in Long-Term/Post-Acute Care.

Welltower expects to fund an additional $660 million of development in 2024 relating to projects underway as of Mar 31, 2024.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Welltower has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Welltower has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Welltower belongs to the Zacks REIT and Equity Trust - Other industry. Another stock from the same industry, SL Green (SLG), has gained 0.7% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

SL Green reported revenues of $128.2 million in the last reported quarter, representing a year-over-year change of -26.6%. EPS of $0.20 for the same period compares with $1.53 a year ago.

For the current quarter, SL Green is expected to post earnings of $1.51 per share, indicating a change of +5.6% from the year-ago quarter. The Zacks Consensus Estimate has changed +5.1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for SL Green. Also, the stock has a VGM Score of C.

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