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A month has gone by since the last earnings report for Ventas (VTR). Shares have added about 59.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ventas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Ventas Q1 FFO & Revenues Surpass Estimates, NOI Declines
Ventas reported first-quarter 2020 normalized FFO per share of 97 cents, beating the Zacks Consensus Estimate of 87 cents. However, the figure was 2% lower than the year-ago quarter’s 99 cents.
The company generated revenues of $1.01 billion in the first quarter, which surpassed the Zacks Consensus Estimate of $967.5 million. The top line also compared favorably with the year-ago number of $942.9 million.
In a separate announcement issued today, Ventas completed a transaction with the affiliates of Holiday Retirement, terminating its lease with the latter relating to Ventas’s 26 independent living assets. Ventas also entered a new, terminable management agreement with Holiday Management Company. Ventas received $100 million, consisting of cash and secured notes for the transaction.
Quarter in Detail
For the first quarter, same-store cash NOI growth for the total property portfolio (1,094 assets) edged down 0.6% year over year. Segment wise, though same-store cash NOI for the NNN leased portfolio grew 3.9% and the office portfolio rose 5.8%, the SHOP portfolio reported a decline of 10.4% year over year.
Ventas completed the acquisition of two fully-occupied life science buildings for $80 million in February. The company also generated $109 million in proceeds from loan repayments and asset sales in the quarter.
Ventas exited first-quarter 2020 with cash and cash equivalents of $2.8 billion, up from the $106.4 million recorded as of the prior quarter end. Further, as of March 31, 2020, its net debt to EBITDA ratio sequentially improved by 40 basis points to 5.7. It also had negligible near-term maturities.
To strengthen its balance sheet position amid the virus outbreak, in March 2020, the company drew down $2.75 billion under its existing $3 billion revolving credit facility. Subsequent to the March-quarter end, the company raised $0.5 billion through a senior note offering.
As a result of the efforts, Ventas had $3.2 billion in cash and cash equivalents on hand as of May 6, with no commercial paper outstanding.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Ventas has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Ventas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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