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Healthcare Realty (HR) Q4 FFO Lags Estimates, Revenues Rise

Zacks Equity Research

Healthcare Realty Trust HR reported fourth-quarter 2017 normalized funds from operations (FFO) per share of 38 cents, missing the Zacks Consensus Estimate of 39 cents. On a year-over-year basis, FFO per share declined 7.3%.

Results indicated higher operating expenses, partially offset by improved same store revenues and liquidity position.

Also, total revenues of $107.7 million in the quarter lagged the consensus estimate of $109.1 million. However, the figure was up 2.2% from the prior-year quarter.

For full-year 2017, Healthcare Realty’s normalized FFO per share was $1.53, reflecting a fall of 6.1% from the year-ago figure of $1.63. Further, it lagged the Zacks Consensus Estimate of $1.55.

Total revenues for the full year came in at $424.5 million, missing the Zacks Consensus Estimate of $426.8 million. However, the figure grew 3.1% year over year.

Results in Detail

For the 12 months ended Dec 31, 2017, same-store revenues improved 3.4%, operating expenses inched up 2.3% and same-store net operating income increased 4.1%. Further, same-store revenues per average occupied square foot grew 2.8% while average same-store occupancy expanded 50 basis points (bps) from the prior year to 89.4%.

Fourth-quarter leasing activity included 152 leases and aggregated 546,000 square feet of space. This comprised 395,000 square feet renewals and 151,000 square feet of new and expansion leases.

For the reported quarter, in the company’s same-store multi-tenant portfolio, contractual rent increases averaged 2.8% while cash leasing spreads were 3.7% on 367,000 square feet renewed. Moreover, tenant retention was 81.9% and the average yield on renewed leases advanced 60 bps.

In addition, for the quarter, acquisitions totaled $246.6 million, which included a medical office building in Chicago worth $28.8 million.

The company exited the fourth quarter with cash and cash equivalents of $6.2 million, up from $5.4 million recorded at the year-ago quarter end.

Dividend Update

On Feb 13, the company announced a quarterly cash dividend of 30 cents per share. This dividend will be paid on Mar 6 to stockholders on record as of Feb 23, 2018, and is equivalent to 78.9% of normalized FFO per share.

Our Take

Although Healthcare Realty missed estimates by a whisker, solid operating performance mirrors encouraging prospects for the company.

The aging baby-boomer generation and greater longevity will likely augment demand for healthcare facilities. Subsequently, the company’s increased medical facility buyouts provide opportunities to become resilient.

However, intense competition and estimated hike in interest rates are expected to curtail the company’s growth momentum in the near term.

Healthcare Realty Trust Incorporated Price, Consensus and EPS Surprise

Healthcare Realty Trust Incorporated Price, Consensus and EPS Surprise | Healthcare Realty Trust Incorporated Quote

Healthcare Realty carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..

Performance of Other REITs

Ventas VTR reported fourth-quarter 2017 normalized FFO of $1.03 per share, in line with the Zacks Consensus Estimate. The figure matched the year-ago quarter tally. Also, results reflect improved property performance and accretive investments.

Cousins Properties Incorporated CUZ reported fourth-quarter 2017 FFO per share of 15 cents, surpassing the Zacks Consensus Estimate by a penny. The quarter witnessed considerable improvement in rental property revenues, which aided results to quite an extent. Also, lower expenses were a tailwind.

Alexandria Real Estate Equities ARE reported fourth-quarter 2017 adjusted FFO of $1.53 per share, missing the Zacks Consensus Estimate by a penny. However, the figure came in higher than $1.42 recorded in the prior-year quarter. The results reflected higher expenses related to rental operations and interest expenses.

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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