What's In The Cards For Welltower (HCN) In Q2 Earnings?
Zacks Investment Research | Jul 24, 2017 10:36PM ET
Welltower Inc. (NYSE:HCN) is slated to report second-quarter 2017 results, before the market opens on Jul 28. Its funds from operations (“FFO”) per share and revenues might see a year-over-year decline.
Last quarter, this healthcare real estate investment trust (“REIT”) delivered an in-line performance. The company also recorded adjusted senior housing operating same-store net operating income (NOI) growth of 1.9% year over year.
Over the trailing four quarters, Welltower posted in-line FFO in one occasion and beat estimates in the other three, recording an average positive surprise of 0.9%. The graph below depicts this surprise history:
Welltower Inc. Price and EPS Surprise
industry it belongs to. While the company’s shares gained 9.3%, the industry rallied 4.3%.
Let’s see how things are shaping up for this announcement.
Factors to Influence Q2 Results
Welltower’s efforts to enhance its healthcare real estate portfolio quality through prudent asset allocation and disposal, along with its diversified portfolio, are anticipated to boost its performance in the quarter to be reported. Additionally, rising senior citizen population will likely prove conducive to growth.
The company establishes business relationships with experienced healthcare management companies or operators who lease its properties on a long-term basis, cushioning it from short-term market shocks. Also, the healthcare sector is relatively immune to macroeconomic headwinds faced by the office, retail and apartment companies, in turn, offering stability to Welltower amid market volatility.
However, interest rate hike remains a concern for Welltower due to its high exposure to long-term leased assets. Any rise in rates escalates the cost of financing acquisitions, investment and development activity expenses, and lowers the amount that third parties would be ready to pay for the company’s assets at disposal.
As part of its portfolio-repositioning efforts, Welltower has been aggressively disposing its assets and acquiring new ones. Though such efforts are commendable, the earnings dilutive effects and upfront costs involved cannot be bypassed.
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Furthermore, Welltower’s activities during the quarter failed to gain adequate analyst confidence. The Zacks Consensus Estimate for funds from operations for the second quarter edged down 0.94% over the last 60 days.
Earnings Whispers
Our proven model does not conclusively show that Welltower will likely beat estimates this season. This is because a stock needs to have both a positive Zacks Investment Research
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