Welltower, Inc. (WELL Quick QuoteWELL - Free Report) is slated to report third-quarter earnings on Nov 7, after market close. Its quarterly results are likely to reflect year-over-year growth in revenues and funds from operations (FFO) per share.

In the last reported quarter, this Toledo, OH-based healthcare real estate investment trust (REIT) delivered a surprise of 1.18% in terms of normalized FFO per share. The results reflected better-than-anticipated top-line growth. The same-store revenues of the seniors housing operating (SHO) portfolio improved year over year, owing to a healthy recovery in its occupancy during the quarter.

Over the preceding four quarters, Welltower’s FFO per share beat the Zacks Consensus Estimate on two occasions and met the same in the other two, the average surprise being 0.91%. The graph below depicts this surprise history:

Factors at Play

In recent quarters, the SHO portfolio has been witnessing a sizeable recovery, with average occupancy levels outpacing the pre-pandemic averages. This trend is likely to have continued through the third quarter.

The significant decline in construction starts and slower net inventory growth are likely to have aided WELL’s SHO portfolio occupancy during the quarter to be reported. Per WELL’s October business update, the company expects year-over-year average occupancy growth to be around 400 basis points, in line with its estimation in the August business update.

In addition, robust pricing power, evidenced by strong realized renewal rate growth, and interim price increases contemplated by several operators during the quarter are expected to have aided the SHO portfolio’s performance.

The Zacks Consensus Estimate for the third-quarter resident fees and services is pegged at $1.04 billion, indicating a 2.8% increase from the previous quarter’s $1.01 billion and a 24.2% rise from the year-ago quarter’s $836 million. The consensus estimate for quarterly rental income stands at $358.8 million, implying a marginal rise from the prior-year quarter’s actuals.

Total revenues for the third quarter are pegged at $1.46 billion, suggesting a rise of 17.7% from the prior-year period’s reported number.

Welltower’s liquidity profile at the end of third-quarter 2022 was encouraging per its October business update, with combined proceeds from unsettled equity issuances and expected dispositions and loan payoffs approaching $2.0 billion. This is anticipated to have provided the company with significant investment capacity at an attractive cost of capital. Also, in the third quarter of 2022, WELL completed nearly $850 million of pro rata gross investments.

However, per the October business update, the delay in the disbursements of Health and Human Services (HHS) funds is likely to have adversely impacted WELL’s third-quarter 2022 normalized FFO per share.

Welltower expects to realize around $2.4 million from HHS Provider Relief Fund compared with nearly $7 million assumed in the company’s guidance. This is likely to result in a reduction of approximately 1 cent per share from expectations. As a result, management expects normalized FFO per share to lie below the midpoint of the guidance of 82-87 cents.

Also, higher interest rates and a stronger U.S. dollar are anticipated to have led to an additional headwind of around 0.5 cents to normalized FFO per share, mainly attributable to the movement in foreign exchange rates.

Welltower’s activities during the third quarter were not adequate to gain analysts’ confidence. The Zacks Consensus Estimate for the third-quarter FFO per share has been unchanged at 84 cents over the past month. Nonetheless, it implies an increase of 5% from the year-ago quarter’s reported figure.

Earning Whispers

Our proven model does not conclusively predict a surprise in terms of FFO per share for Welltower this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.

Earnings ESP: Welltower has an Earnings ESP of -0.50%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: WELL currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Performance of Other REITs

Mid-America Apartment Communities, Inc. (MAA Quick QuoteMAA - Free Report) , commonly referred to as MAA, reported third-quarter 2022 core FFO per share of $2.19, surpassing the Zacks Consensus Estimate of $2.09. The reported number improved by 23% year over year.

This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. MAA increased its outlook for core FFO per share growth for the year.

Healthpeak Properties, Inc. reported third-quarter 2022 FFO as adjusted per share of 43 cents, in line with the Zacks Consensus Estimate. The reported figure was up 7.5% from the year-ago quarter’s 40 cents.

PEAK’s performance was backed by healthy top-line growth. Moreover, improvement in same-store portfolio cash (adjusted) net operating income was witnessed across the portfolio. The company revised its 2022 outlook.

Boston Properties Inc.’s (BXP Quick QuoteBXP - Free Report) third-quarter 2022 FFO per share of $1.91 outpaced the Zacks Consensus Estimate of $1.87. The figure increased 10.4% year over year.

BXP’s quarterly results reflect healthy leasing activity alongside year-over-year growth in the top line. It also carried out strategic acquisitions, redevelopments and dispositions during the quarter. The company revised its 2022 outlook for FFO per share.

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.