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

Zacks Equity Research

Ventas, Inc. VTR is scheduled to report fourth-quarter and 2018 results on Feb 8, before the market opens. The company’s results will likely reflect year-over-year growth in revenues, while its funds from operations (FFO) per share are expected to have witnessed a decline.

In the last reported quarter, this Chicago, IL-based healthcare real estate investment trust (REIT) delivered a positive surprise of 2.06%. Further, the company witnessed same-store cash net operating income (NOI) growth for its triple net leased portfolio.

In addition, Ventas posted average positive surprise of 0.75% in the trailing four quarters, surpassing estimates twice, posting in-line results once, and missing in the other occasion. The graph below depicts this surprise history:

Ventas, Inc. Price and EPS Surprise

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

Let’s see how things have shaped up for this announcement.

Factors at Play

Amid soaring demand for MOBs, Ventas has made strategic efforts to strengthen its relevant portfolio. Moreover, increasing longevity of the aging U.S. population, along with biopharma drug development growth opportunities, has promoted the institutional life-science and medical-market fundamentals.

Hence, we anticipate the company to have witnessed growth in its office portfolio with higher investments. In fact, the Zacks Consensus Estimate for rental income from medical office building is currently pegged at $195 million, indicating a moderate increase from the previous quarter. Also, the Zacks Consensus Estimate for medical office building and other services revenues is $3.32 million, reflecting a marginal sequential improvement.

Nonetheless, increase in supply of senior housing assets in some markets may dampen the performance of Ventas’ senior housing assets. This curtails landlords’ pricing power and limits growth in occupancy level. Hence, we expect the prevalent oversupply situation to have impacted the company’s fourth-quarter numbers.

Additionally, rising interest rates is another unfavorable development for the company. Since the company enters into long-term leases that are subject to annual escalations, Ventas is affected interest rate hikes. In fact, rental income from the company’s triple net-leased properties is pegged at $189 million, indicating a sequential decline from the prior-quarter tally.

Furthermore, higher interest rates are expected to have escalated the company’s interest expense and acquisition-financing costs. This is also expected to have curbed bottom-line growth.

Also, there is lack of any solid catalyst prior to the fourth-quarter earnings release. As such, the Zacks Consensus Estimate of earnings per share for the to-be-reported quarter remained unchanged at 95 cents, over the past month. The figure indicates a decline of 7.8% year over year.

Earnings Whispers

Our proven model does not conclusively show that Ventas is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here, as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earning ESP: Ventas’ Earnings ESP is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank of 3, which increases the predictive power of ESP. However, we also need a positive ESP to be confident of the earnings beat.

Stocks That Warrant a Look

While other players in the REIT space are lined up to report their financial results, below are three stocks, poised to beat on earnings per the proven Zacks model. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hersha Hospitality Trust HT, slated to report fourth-quarter results on Feb 25, has an Earnings ESP of +1.21% and holds a Zacks Rank of 2.

American Tower Corporation AMT, set to release earnings on Feb 27, has an Earnings ESP of +0.29% and carries a Zacks Rank of 3.

CyrusOne Inc. CONE, scheduled to report quarterly numbers on Feb 20, has an Earnings ESP of +3.07 and carries a Zacks Rank of 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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