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Ventas (VTR) to Report Q4 Earnings: What's in the Cards?

Ventas, Inc. VTR is scheduled to report fourth-quarter and full-year 2022 results on Feb 9, 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 previous quarter, this Chicago, IL-based healthcare real estate investment trust (REIT) delivered normalized FFO per share of 76 cents, in line with the Zacks Consensus Estimate. The quarterly results reflected growth in same-store net operating income (NOI) for the senior housing operating portfolio (SHOP), backed by an improvement in occupancy and pricing power. Additionally, the same-store NOI for the office portfolio rose while the triple-net leased portfolio experienced some weakness.

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 1.36%. The graph below depicts this surprise history:

Ventas, Inc. Price and EPS Surprise

Ventas, Inc. Price and EPS Surprise
Ventas, Inc. Price and EPS Surprise

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

Factors at Play

In fourth-quarter 2022, Ventas is expected to have benefited from its high-quality, diversified healthcare real estate portfolio.

Ventas’ SHOP segment, which refers to its senior housing communities in the United States, Canada and the United Kingdom, is likely to have benefited from higher healthcare spending by senior citizens and an aging population during the fourth quarter.

In addition, the senior housing industry is witnessing an improvement in occupancy levels as net-move ins are rising, with move-outs remaining manageable. Per the company’s latest Nareit REITworld Investor Presentation, it expects year-over-year average occupancy growth for the SHOP occupancy to be 100 basis points (bps) to 150 bps during the to-be-reported quarter.

The Zacks Consensus Estimate for fourth-quarter resident fees and services is pegged at $674 million, suggesting an increase from $669 million reported in the prior quarter and $647 million in the year-ago period.

The life-science industry has been benefiting from the increasing life expectancy of the United States population and biopharma drug development growth opportunities. Amid this, the demand for life science real-estate assets has been soaring. Consequently, VTR’s life-science research & innovation portfolio is likely to have experienced healthy leasing activity during the fourth quarter.

Also, growing outpatient trends visits are anticipated to have paid off well for the company’s office segment.

The consensus mark for the fourth-quarter rental income from its office buildings stands at $200 million, indicating an increase from the prior-year quarter’s reading of $195 million. Rental income from its triple-net leased portfolio is pegged at $150 million, suggesting a fall from $153 million reported in the year-ago quarter.

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $1.05 billion, implying a 2.7% increase from the prior-year quarter’s reported figure.

Also, the company’s strong balance sheet is expected to have aided its acquisition and development initiatives.

However, per its latest Nareit REITworld Investor Presentation, Ventas anticipates operating expenses for its SHOP segment to remain elevated in the fourth quarter.

Also, VTR expects normalized FFO to be reduced by around 2 cents per share sequentially due to higher interest rates and a stronger U.S. dollar.

Ventas projected fourth-quarter 2022 normalized FFO per share in the range of 68-74 cents. The Zacks Consensus Estimate for the same has been unchanged at 72 cents in the past month. Moreover, it implies a fall of 1.4% from the year-ago quarter’s figure.

For the full year, the Zacks Consensus Estimate for FFO per share has been unchanged at $2.98 over the past month. Nonetheless, it implies an increase of 2.8% year over year on revenues of $4.12 billion.

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 +0.17%. 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.

Other Stocks That Warrant a Look

Here are some other stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:

Public Storage PSA is scheduled to report quarterly figures on Feb 21. PSA has an Earnings ESP of +0.22 % and a Zacks Rank #3 currently.

SBA Communications SBAC is scheduled to report quarterly figures on Feb 21. SBAC has an Earnings ESP of +0.19% and a Zacks Rank of 3 currently.

Extra Space Storage EXR is scheduled to report quarterly figures on Feb 22. EXR has an Earnings ESP of +0.42% and a Zacks Rank of 3 presently.

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

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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