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HCP Up 5.4% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for HCP, Inc. (HCP - Free Report) . Shares have added about 5.4% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is HCP 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 catalysts.

HCP Beats Q4 FFO Estimates, Boosts Life-Science Portfolio

HCP reported fourth-quarter 2017 FFO as adjusted of 48 cents per share, beating the Zacks Consensus Estimate of 47 cents. Comparable FFO as adjusted in the prior-year quarter was 53 cents per share.

Results reflect a 1.2% increase in the three-month same-property portfolio (SPP) cash NOI.

However, the company generated revenues of $443.3 million, which missed the Zacks Consensus Estimate of $456.2 million. The figure also compared unfavorably with the year-ago number of around $540.0 million.

For full-year 2017, the company reported comparable FFO as adjusted of $1.95 per share, down from $2.04 recorded in the prior year. Full-year revenues also dipped 13.2% year over year to $1.8 billion.

Behind the Headlines

HCP attained year-over-year three-month cash SPP NOI growth of 1.2%. Results were supported by 5.1% increase in life-science cash NOI, 2.6% growth in senior-housing triple-net and 2.1% rise in the Medical office portfolio. However, the positives were much offset by 8.3% decrease in senior-housing operating portfolio (SHOP) cash NOI.

During the fourth quarter, HCP announced $424 million of acquisitions. Notably, the company completed the previously-announced $228 million acquisition of the Hayden Research Campus in the Boston life-science market. It also acquired 11 off-campus medical-office buildings for $151 million. The company started Phase I of Sierra Point, which marks its next key life-science development in the South San Francisco market.

Furthermore, HCP is on track to sell or transition 36 senior housing operating assets and 32 triple-net leased communities, which are currently operated by Brookdale.

HCP had cash and cash equivalents of around $55.3 million as of Dec 31, 2017, down from $94.7 million recorded at the end of 2016. However, the company ended the reported quarter with $1.0 billion of liquidity from a combination of cash and availability under its $2.0-billion credit facility.

It has no major senior notes or secured debt maturities until 2019.

Outlook

HCP provided its 2018 FFO as adjusted guidance range and expects it to be in the band of $1.77-$1.83 per share. The company projects 2018 SPP cash NOI growth in the range of 0.25-1.75%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared to one lower.

HCP, Inc. Price and Consensus

VGM Scores

At this time, HCP has a poor Growth Score of F, however its Momentum is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, HCP has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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