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Should You Hold Ventas (VTR) Stock in Your Portfolio Now?
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Ventas, Inc. (VTR - Free Report) has an impressive portfolio of senior housing and medical office properties. The aging demographics in the United States indicate that demand for these assets will likely rise over the upcoming years. However, high supply of senior housing properties is expected to intensify competition for new residents, in turn, resulting in negative rent-releasing spreads for the company.
It has a robust portfolio of seniors housing operating assets, with specific focus on high-barrier-to-entry coastal markets. This will help generate steady cash flows from this portfolio.
Also, since the healthcare sector is relatively immune to the macroeconomic problems faced by office, retail and apartment companies, it offers stability to the company amid volatility in the market. This is because even amid tough economic conditions, consumers will spend on healthcare services while curtailing discretionary purchases.
Moreover, Ventas is fortifying its position in the medical office and life-science real estate market to capitalize on the growing healthcare-driven research and development. In fact, in February, the company expanded its investments in university-based Research & Innovation (R&I) business to $3.5 billion, with the announcement of a development pipeline of more than $1.5 billion in new investments.
With a strong balance sheet and ample liquidity, the company is able to eye high-yielding acquisitions and high ROI (return on investments) capital projects. This balance-sheet strength has also enabled the company to consistently increase its dividend every year for more than a decade.
Ventas’ effort to unlock value of its assets through timely disposals and using proceeds to retire debt and invest in growth opportunities is a strategic fit. In fact, it anticipates to sell $150-$200 million of Brookdale asset in 2019. Nonetheless, this will result in loss of base rent and impact the company’s near-term earnings. Furthermore, it has significant near-term loan repayments, which will likely affect the company’s liquidity.
Moreover, higher supply of seniors housing assets in certain markets remains a concern for Ventas. This is because elevated supply usually curtails landlords’ pricing power and limits growth in occupancy level. In fact, management expects elevated deliveries of senior housing assets this year.
Shares of this Zacks Rank #3 (Hold) company have gained 5% over the past three months, underperforming the industry’s growth of 13.1%.
Terreno Realty’s funds from operations (FFO) per share estimates for 2019 remained unchanged at $1.42, in the past two months. In addition, it has a long-term growth rate of 8.40%.
Cousins Properties’ Zacks Consensus Estimate for first-quarter 2019 FFO per share has been revised marginally upward to 20 cents in the past month. Also, it has a long-term growth rate of 3.50%.
Alexandria’s FFO per share estimate for the ongoing year has been revised marginally north to $6.96 in two months’ time. Additionally, it has a long-term growth rate of 4.40%.
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This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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Should You Hold Ventas (VTR) Stock in Your Portfolio Now?
Ventas, Inc. (VTR - Free Report) has an impressive portfolio of senior housing and medical office properties. The aging demographics in the United States indicate that demand for these assets will likely rise over the upcoming years. However, high supply of senior housing properties is expected to intensify competition for new residents, in turn, resulting in negative rent-releasing spreads for the company.
It has a robust portfolio of seniors housing operating assets, with specific focus on high-barrier-to-entry coastal markets. This will help generate steady cash flows from this portfolio.
Also, since the healthcare sector is relatively immune to the macroeconomic problems faced by office, retail and apartment companies, it offers stability to the company amid volatility in the market. This is because even amid tough economic conditions, consumers will spend on healthcare services while curtailing discretionary purchases.
Moreover, Ventas is fortifying its position in the medical office and life-science real estate market to capitalize on the growing healthcare-driven research and development. In fact, in February, the company expanded its investments in university-based Research & Innovation (R&I) business to $3.5 billion, with the announcement of a development pipeline of more than $1.5 billion in new investments.
With a strong balance sheet and ample liquidity, the company is able to eye high-yielding acquisitions and high ROI (return on investments) capital projects. This balance-sheet strength has also enabled the company to consistently increase its dividend every year for more than a decade.
Ventas’ effort to unlock value of its assets through timely disposals and using proceeds to retire debt and invest in growth opportunities is a strategic fit. In fact, it anticipates to sell $150-$200 million of Brookdale asset in 2019. Nonetheless, this will result in loss of base rent and impact the company’s near-term earnings. Furthermore, it has significant near-term loan repayments, which will likely affect the company’s liquidity.
Moreover, higher supply of seniors housing assets in certain markets remains a concern for Ventas. This is because elevated supply usually curtails landlords’ pricing power and limits growth in occupancy level. In fact, management expects elevated deliveries of senior housing assets this year.
Shares of this Zacks Rank #3 (Hold) company have gained 5% over the past three months, underperforming the industry’s growth of 13.1%.
Stocks to Consider
Investors can consider better-ranked stocks from the same space like Terreno Realty Corporation (TRNO - Free Report) , Cousins Properties Incorporated (CUZ - Free Report) and Alexandria Real Estate Equities, Inc (ARE - Free Report) , carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Terreno Realty’s funds from operations (FFO) per share estimates for 2019 remained unchanged at $1.42, in the past two months. In addition, it has a long-term growth rate of 8.40%.
Cousins Properties’ Zacks Consensus Estimate for first-quarter 2019 FFO per share has been revised marginally upward to 20 cents in the past month. Also, it has a long-term growth rate of 3.50%.
Alexandria’s FFO per share estimate for the ongoing year has been revised marginally north to $6.96 in two months’ time. Additionally, it has a long-term growth rate of 4.40%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
See their latest picks free >>