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HCP Meets Q4 FFO Estimates, Misses on Revenues, Issues View

Zacks Equity Research

HCP Inc. HCP reported fourth-quarter 2018 funds from operations (FFO) as adjusted of 43 cents per share, meeting the Zacks Consensus Estimate. Comparable FFO as adjusted in the prior-year quarter was 48 cents per share.

Results were supported by decent performance of the company’s life-science, senior-housing triple-net and medical-office segment.

This healthcare real estate investment trust (REIT) generated revenues of $441.9 million, missing the Zacks Consensus Estimate of $447.9 million. Further, the figure compares unfavorably with the year-ago number of $443.2 million.

For full-year 2018, FFO as adjusted per share came in at $1.82, down 6.7% year over year, and in line with the Zacks Consensus Estimate. Revenues for the year marginally declined year over year to $1.84 billion. The reported tally missed the Zacks Consensus Estimate of $1.85 billion.

Behind the Headlines

HCP witnessed 1.5% year-over-year rise in the three-month cash SPP net operating income (NOI). There was 3.9% growth in life-science cash NOI, 2.5% increase in senior-housing triple-net segment, 1.9% rise in the medical office segment and 4.3% advancement in other non-reportable segments. However, these positives were partly offset by a 11.6% decrease in senior-housing operating portfolio (SHOP) cash NOI.

During the quarter under review, HCP completed the previously-announced sales of 19 senior housing communities for $377 million and Shoreline Technology Center for gross proceeds of $1 billion.

In 2018, management of 38 senior-housing communities, owned by HCP, was transitioned from Brookdale to other operators.

HCP had cash and cash equivalents of around $110.8 million as of Dec 31, 2018, significantly up from $55.3 million recorded at the end of 2017. Additionally, the company ended the fourth quarter with $1.9 billion available under its $2-billion credit facility.


HCP provided its 2019 FFO as adjusted guidance at $1.70-$1.76 per share. The Zacks Consensus Estimate is pegged at $1.76.

Furthermore, the company expects 2019 SPP cash NOI growth for total portfolio to be 1.25-2.75%.


In fourth-quarter 2018, HCP made diligent efforts to strengthen its balance sheet. Through its ATM program, the company raised gross proceeds of $156 million and completed the common stock offering of 17 million shares in a public offering.

Nevertheless, it witnessed a decline in interest income, as well as resident fees and services revenues, as compared to the prior-year quarter. Going forward, we identify rising interest rates and stiff competition as major hurdles for the company.

HCP, Inc. Price, Consensus and EPS Surprise

HCP, Inc. Price, Consensus and EPS Surprise | HCP, Inc. Quote

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

Performance of Other REITs

Ventas, Inc. VTR reported fourth-quarter 2018 normalized FFO of 96 cents, beating the Zacks Consensus Estimate of 95 cents. However, the figure came in lower than the year-ago tally of $1.03.

Alexandria Real Estate Equities, Inc. ARE recorded fourth-quarter 2018 adjusted FFO of $1.68 per share, missing the Zacks Consensus Estimate by a whisker.

Boston Properties Inc.’s BXP fourth-quarter 2018 FFO per share of $1.59 also missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.

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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