Back to top

Analyst Blog

HCP Inc. – a healthcare real estate investment trust (REIT) – reported second-quarter 2014 adjusted FFO (funds from operations) per share of 75 cents, in line with the Zacks Consensus Estimate and up 4.2% from 72 cents reported in the year-ago quarter.

Total revenue came in at nearly $536.1 million, reflecting an increase of 4.7% from the year-ago quarter. Total revenue also exceeded the Zacks Consensus Estimate of $519 million. The company’s adjusted same-property cash net operating income (NOI) reached $407.1 million, growing 2.4% year over year.

Behind the Headlines

During the quarter, HCP executed three leases aggregating 129,000 square feet in its 639,000 sq. ft. Redwood City life science campus. Moreover, HCP accomplished $360 million of investment transactions. These comprised UK care home portfolio acquisition worth $127 million (£75.8 million) as well as $233 million of other investment deals across its senior housing, life science and medical-office divisions.

Moreover, Brookdale Senior Living Inc. (BKD) and HCP extended their ties through amendment of leases and creation of a new $1.2 billion CCRC joint venture that is expected to close later this month.

Notably, year-to-date, HCP’s closed and committed total investments were $1.1 billion, taking into account its 49% share of the CCRC JV.

Liquidity

At the end of the quarter, HCP had cash and cash equivalents of $54.1 million, as against $300.6 million at the prior-year end.

Outlook

HCP, raising its full-year 2014 outlook, presently expects FFO in the range of $3.01 – $3.07 per share, up from the prior projection of $2.96 – $3.02. The Zacks Consensus Estimate of $3.02 per share for full-year 2014 comes within the estimated range. The projections, although reflecting the pending impact of the Brookdale Deal, do not incorporate the probable impact of future acquisitions.

Dividend Update

Recently, HCP announced a quarterly cash dividend of 54.5 cents per share. The dividend will be paid on Aug 26, 2014 to stockholders of record on Aug 11.

In Conclusion

We are encouraged by a raise in HCP‘s full-year outlook. Going forward, we believe that improving fundamentals in the healthcare REIT market, a well-balanced and diversified portfolio, along with strategic acquisitions and tie-ups would place this Zacks Rank #2 (Buy) stock on the growth trajectory. However, cut-throat competition continues to pose a challenge for the company.

Other Health Care Reit stocks:

Recently, Healthcare Realty Trust Inc. reported second-quarter 2014 normalized FFO per share of 36 cents, which came in line with the Zacks Consensus Estimate but surpassed the prior-year quarter figure by 4 cents. Results were driven by a significant rise in revenues.

Moreover, Health Care REIT Inc. reported second-quarter 2014 normalized FFO of $1.06 per share, a nickel ahead of the Zacks Consensus Estimate and up 13 cents year over year. The 14% year-over-year increase was primarily driven by growth in same-store net operating income (NOI) and notable portfolio investments in premium assets. Based on these factors, the company has also expanded its 2014 outlook.

We now look forward to the results of another REIT – Ventas, Inc. – which is scheduled to report next week.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
 

Please login to Zacks.com or register to post a comment.