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Key Factors to Impact Omega Healthcare's (OHI) Q1 Earnings

Zacks Equity Research

Omega Healthcare Investors, Inc. OHI is slated to report first-quarter 2020 results on May 4, after the closing bell. The company’s quarterly results will likely display year-over-year growth in revenues, while its funds from operations (FFO) per share might remain flat.

In the last reported quarter, this real estate investment trust delivered a positive surprise of 1.30% in terms of adjusted FFO per share. Results reflected year-over-year increase in operating revenues.

The company beat estimates in all of the trailing four quarters, the average positive beat being 2.35%. This is depicted in the graph below.

Omega Healthcare Investors, Inc. Price and EPS Surprise
 

Omega Healthcare Investors, Inc. Price and EPS Surprise

Omega Healthcare Investors, Inc. price-eps-surprise | Omega Healthcare Investors, Inc. Quote

Investing in the long-term healthcare industry, mainly in skilled nursing (SNF) and assisted living facilities, Omega Healthcare has emerged as a leading SNF-focused REIT, and achieved diversification in terms of geography and operator in the United States and the U.K. The company’s properties are operated by a diverse group of healthcare companies, primarily in a triple-net lease structure. This diversification is anticipated to have aided the company’s top-line growth in the to-be-reported quarter.

Further, Omega aimed for accretive buyouts in 2019, after completing its strategic asset repositioning and portfolio restructurings in 2018. Particularly, in the fourth quarter of 2019, the company completed the $735-million Encore portfolio acquisition. The company also acquired a 49% interest in a U.K. senior housing joint venture for $93 million from Healthpeak. These expansion efforts are likely to have aided the company’s top-line growth in the first quarter of 2020.

Amid these, the Zacks Consensus Estimate for first-quarter revenues of $254.2 million suggests a 13.7% increase, year over year.

However, while decreasing length of stay and rising labor costs have been prevalent issues for the company, the coronavirus outbreak in the second half of the quarter has raised concerns about occupancy levels due to lower admissions. Also, expenses are likely to have flared up in the quarter under consideration with increased staff levels and rigorous protocols for infection. Moreover, tenant credit headwinds are likely to have curbed any robust growth .

Notably, Omega’s activities during the March-end quarter were inadequate to gain analyst confidence. The Zacks Consensus Estimate for the quarterly FFO per share remained unchanged at 76 cents over the past month. The figure also suggests no change year over year.

Here is what our quantitative model predicts:

Our proven model predicts a beat in terms of FFO per share for Omega this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of a beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Omega currently carries a Zacks Rank of 3 and has an Earnings ESP of +2.02%.

Other Stocks That Warrant a Look

Here are a few other stocks in the REIT sector that you may want to consider, as our model shows that these too have the right combination of elements to report a positive surprise this quarter:

SBA Communications Corporation SBAC, set to report quarterly numbers on May 5, has an Earnings ESP of +0.67% and carries a Zacks Rank of 3 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

CoreSite Realty Corporation COR, slated to release first-quarter earnings on Apr 30, has an Earnings ESP of +3.19% and carries a Zacks Rank of 3 at present.

Americold Realty Trust COLD, expected to release earnings results around May 7, has an Earnings ESP of +9.74% and currently holds a Zacks Rank #3.

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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