HCP, Inc ( HCP - Analyst Report ) , a real estate investment trust (REIT), is scheduled to report its third quarter 2012 earnings on October 30. The current Zacks Consensus Estimate for the third quarter is pegged at 69 cents per share, representing a year-over-year growth of about 3.6%.

Second Quarter Recap

HCP reported second quarter 2012 FFO (funds from operations) of $293.6 million or 69 cents per share compared with $317.9 million or 78 cents per share in the year-earlier quarter.

Excluding non-recurring items, FFO for the reported quarter was $293.6 million or 69 cents per share compared with $312.2 million or 77 cents per share in the year-ago quarter. Recurring FFO per share in the quarter beat the Zacks Consensus Estimate by a penny.

HCP reported total revenue of $464.4 million during the quarter compared with $488.1 million in the year-ago period. Total revenue in the reported quarter missed the Zacks Consensus Estimate of $469.0 million.

Agreement of Analysts

In the last 7 days, none of the analysts have revised their earnings estimates upward for 2012, while only one have revised it down. For 2013, one analyst have revised the earnings estimates upward in the last seven days 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

For full-year 2012, the company expects FFO in the range of $2.73 to $2.79 per share. The Zacks Consensus Estimates for 2012 have remained constant over the last 7 days at $2.76 per share, which is at the middle of the company's guidance. For 2013, the Zacks Consensus Estimate has increased in the last 7 days by a penny to $2.97.

Our Recommendation

HCP is a leading medical REIT in the U.S. 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 U.S., 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.