HCP, Inc ( HCP - Analyst Report ) , a real estate investment trust (REIT), is scheduled to report its first quarter 2012 earnings on May 1, 2012. The current Zacks Consensus Estimate for the first quarter is pegged at 67 cents per share, representing a year-over-year growth of about 19.5%.

Fourth Quarter Recap

HCP reported fourth quarter 2011 FFO (fund from operations) of $150.6 million or 37 cents per share, compared with $202.6 million or 62 cents per share in the year-earlier quarter. Fund from operations, 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.

Excluding non-recurring items, FFO for the reported quarter was $275.6 million or 67 cents per share compared to $206.9 million or 64 cents per share in the year-ago quarter. The fourth quarter 2011 recurring FFO marginally missed the Zacks Consensus Estimate by one cent.

HCP reported total revenue of $461.6 million during the quarter compared with $341.0 million in the year-ago period. Total revenue for the reported quarter was ahead of the Zacks Consensus Estimate of $459.0 million.

Agreement of Analysts

In the last 7 days, none of the analysts revised their earnings estimatef or the first quarter. For fiscal 2012, one out of the 17 analysts increased the earnings estimate while none moved in the opposite direction. This signifies that the analysts are cautious about both the short- and long-term earnings prospect of the company.

Magnitude of Estimate Revisions

Taking into account the analysts’ earnings revision, the Zacks Consensus Estimate for the first quarter and fiscal 2012 remained constant over the last 7 days at 67 cents per share and $2.75 per share, respectively. For full-year 2012, the company expects FFO in the range of $2.70 - $2.76 per share.

Our Recommendation

HCP is the leading medical REIT in the US with one of the largest and most diversified portfolios in the healthcare sector with exposure to all types of facilities. The product diversity of the company allows it to capitalize on opportunities in different markets based on individual market dynamics, and provides a competitive advantage over its peers.

In addition, healthcare is relatively immune to the economic problems faced by office, retail and apartment companies. Consumers will continue to spend on healthcare while cutting out discretionary purchases. The healthcare industry is the single largest industry in the US, based on Gross Domestic Product (GDP), and offers stability to the company amidst the volatility in the market.

However, a large portion of HCP’s revenue originates from a few tenants, which exposes it to concentration risk. If one of the company’s larger tenants runs into financial difficulty, earnings could be negatively affected.

HCP currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Health Care REIT, Inc ( HCN - Analyst Report ) also holds a Zacks #3 Rank.