Is it Wise to Hold on to Healthpeak (PEAK) Stock Right Now?
Healthpeak Properties, Inc.’s PEAK portfolio, comprising mainly of life-science, medical office and continuing care retirement communities (CCRC), is well-positioned to benefit from improving industry fundamentals and presence in the high barrier-to-entry markets.
Particularly, the life-science real-estate properties are poised to gain from the increasing life expectancy of the U.S. population and biopharma drug development growth opportunities. Given the need to develop vaccines and treatments for COVID-19, this segment has received a boost. This is driving sector fundamentals, leasing activity and rent growth.
Amid the favorable environment, in the first quarter, Healthpeak announced the execution of long-term leases with Graphite Bio and another leading biotech company at its life science development, Nexus on Grand.
Healthpeak’s CCRC portfolio, which refers to its retirement communities, is owned and operated through REIT Investment Diversification and Empowerment Act of 2007 (commonly referred to as RIDEA) structures. Under this structure, the residents pay the third-party manager-operators directly or via private insurance. This reduces the operators’ dependency on government reimbursement programs like Medicare and Medicaid, thereby sustaining steady cash flows.
Maintaining a decent balance sheet position also supports PEAK’s growth endeavors. The company ended the first quarter with a net debt-to-adjusted EBITDAre of 5.1X and liquidity of $2.1 billion. Also, investment-grade credit ratings of Baa1 from Moody’s and BBB+ from S&P Global and Fitch provide easy access to capital at favorable costs. This gives Healthpeak enough financial flexibility to continue its expansion efforts.
However, a spike in new COVID-19 cases due to new variants could adversely impact the CCRC portfolio.
Also, a hike in interest rates might lead to higher borrowing costs for the company, which would affect its ability to purchase or develop real estate. Healthpeak’s total consolidated debt as of Mar 31, 2022, was approximately $6.4 billion. Moreover, the dividend payout might become less attractive than the yields on fixed income and money market accounts.
Analysts seem bearish about this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share does not indicate a favorable outlook for the company as it has remained unchanged in the past two months at $1.74. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Healthpeak have declined 19.9% in the past three months compared with the industry’s fall of 4.9%.
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Stocks to Consider
Some better-ranked stocks in the REIT sector are Prologis PLD, OUTFRONT Media OUT and Cedar Realty Trust CDR.
The Zacks Consensus Estimate for Prologis’ 2022 FFO per share has moved 1.8% upward in the past two months to $5.15. PLD presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 51.5% over the past two months to $2.09. OUT carries a Zacks Rank #1, currently.
The Zacks Consensus Estimate for Cedar Realty Trust’s current-year FFO per share has moved 3.6% northward in the past month to $2.59. CDR carries a Zacks Rank of 2 at present.
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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Prologis, Inc. (PLD) : Free Stock Analysis Report
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Healthpeak Properties, Inc. (PEAK) : Free Stock Analysis Report
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