Why Is Welltower (WELL) Up 6.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Welltower (WELL). Shares have added about 6.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Welltower due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Welltower Q3 FFO Tops, SHO Occupancy Up, '23 View Raised
Welltower's third-quarter 2023 normalized FFO per share of 92 cents surpassed the Zacks Consensus Estimate of 89 cents. The reported figure improved 9.5% from the prior-year quarter’s actual.
Results reflected better-than-anticipated revenues. The total SSNOI increased year over year, driven by SSNOI growth in the SHO portfolio. The company also raised its guidance for 2023 normalized FFO per share.
WELL clocked in revenues of $1.66 billion in the quarter, outpacing the Zacks Consensus Estimate of $1.64 billion. Moreover, the top line increased 12.8% year over year.
Quarter in Detail
The SHO portfolio’s same-store revenues increased 9.8% year over year, backed by a 220 bps uptick in average occupancy from the year-ago quarter. A 6.9% year-over-year rise in same-store revenue per occupied room was another contributing factor.
In the third quarter, property operating expenses flared up 9.1% to $995.3 million year over year.
The company’s total portfolio SSNOI grew 14.1% year over year, supported by SSNOI growth in its SHO portfolio of 26.1%.
WELL’s pro-rata gross investments in the third quarter totaled $1.6 billion. This included $1.4 billion in acquisitions and loan funding and $270 million in development funding. It opened seven development projects for a pro-rata investment amount of $137 million. Welltower also completed pro-rata property dispositions and loan payoffs of $325 million in the quarter.
Portfolio Activity
During the third quarter, Welltower acquired five SHO properties, two Outpatient Medical properties and 24 Long-Term/ Post-Acute Care properties for a pro-rata purchase price of $619 million. Moreover, it received $320 million in proceeds from the disposition of 17 seniors housing properties and one medical office building and $5 million in proceeds received from loan payoffs.
Balance Sheet Position
As of Oct 30, 2023, WELL had $6.6 billion of available liquidity, including full capacity, under its $4 billion line of credit.
2023 Guidance Raised
Welltower now projects a 2023 normalized FFO per share of $3.59-$3.63, up from the prior-guided range of $3.51-$3.60.
The company’s full-year guidance now assumes the average blended SSNOI growth of 11.5-13.5%, comprising 23-26% growth in Seniors Housing Operating, 1.5-2.5% in Seniors Housing Triple-net, 2.5-3% in Outpatient Medical and 4-5% in Long-Term/Post-Acute Care.
Welltower expects to fund an additional $334 million of development in 2023 relating to projects underway as of Sep 30, 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Welltower has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile 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.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Welltower has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Welltower belongs to the Zacks REIT and Equity Trust - Other industry. Another stock from the same industry, SL Green (SLG), has gained 24.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
SL Green reported revenues of $131.52 million in the last reported quarter, representing a year-over-year change of -8%. EPS of -$0.38 for the same period compares with $1.66 a year ago.
SL Green is expected to post earnings of $1.06 per share for the current quarter, representing a year-over-year change of -27.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -10.4%.
SL Green has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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