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What's in Store for Medical Properties' (MPW) Q1 Earnings?

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In this article:
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Medical Properties Trust, Inc.  MPW — also known as MPT — is scheduled to report first-quarter 2019 results on May 2, before the market opens. The company’s results will likely reflect year-over-year decline in its funds from operations (FFO) and revenues.

In the last reported quarter, this self-advised real estate investment trust (REIT), which acquires and develops net-leased healthcare facilities, posted normalized funds from operations (NFFO) per share of 31 cents, meeting the Zacks Consensus Estimate.

Over the trailing four quarters, the company met the Zacks Consensus Estimate on three occasions and met in the other. It delivered an average positive surprise of 0.74% during this period. The graph below depicts this surprise history:

Medical Properties Trust, Inc. Price and EPS Surprise


Medical Properties Trust, Inc. Price and EPS Surprise | Medical Properties Trust, Inc. Quote

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Healthcare REITs are benefiting from higher healthcare spending and the demographic boom that is being fueled by the aging baby boomers. In fact, going by a presentation, nearly 10,000 baby boomers will turn 65 every day through 2030. 

To benefit from the wave of this silver tsunami, MPT continues to execute its strategic growth strategy. The company has been acquiring assets that offer portfolio-diversification and property lease-back opportunities. In fact, in January, it entered into a definitive agreement to acquire 11 Australian hospitals from affiliates of Healthscope Ltd. and subsequently lease it back to Healthscope.

Moreover, MPT enters into net leases with operators that reduce costs and operating risks. Also, the company is expected to benefit from its sound capital structure and a stable operating portfolio that is geographically diversified.

Further, the company has been issuing common shares and monetizing assets as it aims to improve financial flexibility and fund significant buyout opportunities anticipated in the ongoing year. However, it witnesses fluctuations in leverage on the basis of timing of its investment activities and this remains a concern.

Nevertheless, the company’s results are tied to its tenant operators’ performances, which, in turn, are exposed to greater volatility due to reimbursement and regulatory risks. Given MPT’s high tenant concentration, its earnings are likely to be more volatile. 

In fact, Steward Healthcare, Prime Healthcare and Median account for a significant part of MPT’s top line.

In addition, the Zacks Consensus Estimate for first-quarter revenues is pegged at $183.9 million. This represents a year-over-year decline of 10.3% from the year-earlier quarter’s reported tally.

Also, there is lack of any solid catalyst prior to the first-quarter earnings release. As such, the Zacks Consensus Estimate of earnings per share for the to-be-reported quarter remained unchanged at 32 cents, over the past month. This calls for a decline of 11% year over year.

Earnings Whispers

Our proven model does not conclusively show that MPT 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: MPT’s Earnings ESP is -1.98%.

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 an earnings beat.

Stocks That Warrant a Look

Several other players in 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.

Lexington Realty Trust LXP, scheduled to release earnings on May 8, has an Earnings ESP of +2.44% and currently carries a Zacks Rank of 2.

Park Hotels & Resorts Inc. PK, slated to report first-quarter results on May 9, has an Earnings ESP of +0.24% and holds a Zacks Rank of 2, at present.

National Storage Affiliates Trust NSA, set to release quarterly numbers on May 2, has an Earnings ESP of +0.92% and carries a Zacks Rank of 3, currently.

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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Park Hotels & Resorts Inc. (PK) : Free Stock Analysis Report
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