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Welltower (WELL) Misses Q4 FFO Estimates, Reaffirms '19 View

Zacks Equity Research

Welltower Inc. WELL reported normalized funds from operations (FFO) per share of $1.01 for fourth-quarter 2018, which missed the Zacks Consensus Estimate of $1.03. Moreover, the figure compares unfavorably with the year-ago tally of $1.02.

Results reflect healthy same-store net operating income (SSNOI) performance of its seniors housing triple-net, outpatient medical and long-term/post-acute care segments. The company has also reaffirmed its normalized FFO per share outlook for the current year.

Moreover, the company posted revenues of nearly $1.24 billion that outpaced the Zacks Consensus Estimate of $1.23 billion. The revenue figure also compares favorably with the year-ago tally of $1.1 billion.

For full-year 2018, normalized FFO per share came in at $4.03, missing the Zacks Consensus Estimate of $4.05. The figure also declined 4.3% year over year. Revenues for full-year 2018 improved 9.3% year over year to $4.7 billion. Also, the reported figure outpaced the Zacks Consensus Estimate of $4.67 billion.

Quarter in Detail

Total portfolio SSNOI inched up 1.6% year over year, driven by growth across all its segments.

Welltower accomplished $722 million of pro-rata gross investments in the fourth quarter. This included $559 million in acquisitions, $92 million in development funding and $70 million in land acquisitions.

In the meantime, the company also accomplished total dispositions of $394 million in the reported quarter. This comprised property sales of $110 million, sale of $239 million of non-yielding properties acquired in the QCP buyout, and loan payoffs of $46 million.

The company exited the Dec-end quarter with $215 million of cash and cash equivalents, down from $243.8 million recorded at the end of the prior-year quarter. In addition, as of Dec 31, 2018, it had $1.9 billion of available borrowing capacity under its new primary unsecured credit facility.

Dividend Update

Welltower announced a cash dividend of 87 cents per share for the fourth quarter. The dividend will be paid on Feb 28, to stockholders of record on Feb 22, 2018. This marks the company’s 191st consecutive quarterly cash dividend payout to stockholders.

2019 Outlook

Welltower reiterated its 2019 normalized FFO per share outlook of $4.10-$4.25. The Zacks Consensus Estimate for the same is currently pegged at $4.22.

In addition, the company anticipates its 2019 average blended SSNOI to be up around 1.25-2.25%. Further, full-year disposition proceeds are projected to be around $1.4 billion.

Our Take

Welltower’s fourth-quarter 2018 results were buoyed by decent performance across all of its operating segments. In fact, the company’s seniors housing operating portfolio witnessed an expansion of 40 basis points in occupancy, indicating the largest increase in two years.

In addition, as part of its portfolio-repositioning efforts, the company completed more than $4 billion in accretive acquisitions. This will boost Welltower’s operating platform.

However, higher dispositions completed during the quarter are expected to impact Welltower’s near-term bottom-line performance. Furthermore, development projects involve considerable upfront costs and remain a drag as new properties usually take time to generate revenues.

Welltower Inc. Price, Consensus and EPS Surprise
 

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

Currently, Welltower has 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 reported 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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