Is a Beat in Store for Ventas (VTR) This Earnings Season?
Ventas, Inc. VTR is scheduled to report second-quarter 2023 results on Aug 3, after market close. The company’s quarterly results are likely to display year-over-year revenue growth and funds from operations (FFO) per share.
In the last reported quarter, this Chicago, IL-based healthcare real estate investment trust (REIT) delivered normalized FFO per share of 74 cents, beating the Zacks Consensus Estimate by 5.71%. The quarterly results reflected better-than-anticipated revenues. Also, the same-store cash net operating income (NOI) for the senior housing operating portfolio (SHOP) improved year over year on strong pricing power and margin expansion.
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 1.78%. The graph below depicts this surprise history:
Ventas, Inc. Price and EPS Surprise
Ventas, Inc. price-eps-surprise | Ventas, Inc. Quote
Factors at Play
During the second quarter, Ventas is likely to have capitalized on senior citizens' positive healthcare expenditure trend, which is generally higher than the average population.
The company’s SHOP segment, which refers to its senior housing communities in the United States, Canada and the United Kingdom, is expected to have witnessed healthy move-in activity, given the robust demand for this need-based asset category. Also, with the new supply pipeline as a percentage of inventory being favorable, occupancy for this portfolio is expected to have remained high.
In addition, strong pricing power and moderating operating expenses in the company’s SHOP segment are likely to have driven NOI growth for this segment during the quarter. We expect second-quarter SHOP’s NOI to increase 14.4% year over year.
The demand for Ventas’ life-science portfolio is anticipated to have been robust during the to-be-reported quarter on the back of the growing need for drug research and innovation, aiding healthy leasing activity and resulting in occupancy gains and rent growth.
Also, the life-science portfolio’s high-quality tenant base is likely to have led to stable rental revenue generation, boosting the top line.
The Zacks Consensus Estimate for second-quarter resident fees and services is pegged at $711.9 million, suggesting an increase from $704.9 million reported in the prior quarter and $658.1 million in the year-ago period. Our estimate for quarterly resident fees and services suggests a rise of 4.2% year over year.
The consensus mark for the second-quarter rental income from VTR’s office buildings stands at $203.6 million, indicating a 2.2% improvement from the prior-year quarter’s reading. We, too, expect quarterly rental income from the company’s office buildings to grow 2.2% year over year.
The Zacks Consensus Estimate for quarterly revenues is currently pegged at $1.08 billion, implying a 5.6% increase from the prior-year quarter’s reported figure.
Further, Ventas is expected to have continued its accretive investments and strategic buyouts during the second quarter. Its robust balance sheet position is expected to have supported such activities.
The Zacks Consensus Estimate for second-quarter FFO per share has been unchanged at 74 cents over the past month. The figure, however, implies an improvement of 2.8% from the year-ago quarter’s tally.
Nonetheless, higher interest expenses during the quarter might have impeded the company’s performance to some extent. We expect the second quarter’s interest expense to rise 17.1% year over year.
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 +1.75%. 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 #2 (Buy). 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, too, have the right combination of elements to deliver a surprise this reporting cycle:
Ryman Hospitality Properties RHP is slated to report quarterly numbers on Aug 3. RHP has an Earnings ESP of +3.87% and carries a Zacks Rank #1 presently.
Americold Realty Trust COLD is scheduled to report quarterly figures on Aug 3. COLD currently has an Earnings ESP of +1.96% and a Zacks Rank #3.
Postal Realty Trust PSTL is scheduled to report quarterly numbers on Aug 8. PSTL has an Earnings ESP of +3.09% and a Zacks Rank #3 currently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represents 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
Ryman Hospitality Properties, Inc. (RHP) : Free Stock Analysis Report
Americold Realty Trust Inc. (COLD) : Free Stock Analysis Report
Postal Realty Trust, Inc. (PSTL) : Free Stock Analysis Report
