A month has gone by since the last earnings report for Healthpeak (PEAK - Free Report) . Shares have added about 5.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Healthpeak due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Healthpeak Q2 FFO Meets Estimates, Revenues Miss
Healthpeak reported second-quarter 2020 FFO as adjusted of 40 cents per share, meeting the Zacks Consensus Estimate. However, the reported figure compared unfavorably with FFO as adjusted of 44 cents per share in the prior-year quarter.
The healthcare REIT generated revenues of $588.4 million, missing the Zacks Consensus Estimate of $687.6 million. Nonetheless, the figure was higher than the year-ago number of 491.6 million.
Results were supported by the decent performance of its life science and medical office segments. However, the company experienced around $20 million (3.5 cents per share) of elevated expenses at its SHOP and CCRC segments.
Behind the Headlines
Healthpeak witnessed a 2.2% year-over-year decline in the three-month cash same-store portfolio (SPP) NOI. It registered 7.3% growth in life-science cash NOI, a 1.3% rise in the medical office segment, 2.9% advancement in other non-reportable segments and a 21.2% decline in senior-housing segment cash NOI.
Notable Portfolio Activities in Q2
In June 2020, the company closed the previously-announced sale of three medical office buildings in San Diego, CA, generating proceeds of around $106 million.
In June 2020, it signed a 17-year lease for 74,000 square feet at the Boardwalk development project in San Diego, CA. Notably, the 190,000-square-foot Class A development project is presently 39% pre-leased.
In April 2020, it completed the buyout of the previously-announced life science campus —The Post —for $320 million.
Healthpeak had cash and cash equivalents of $730.9 million as of Jun 30, 2020, up from $144.2 million recorded at the end of 2019.
In June, the company raised $600 million through a senior unsecured notes offering and used proceeds to redeem all of its outstanding $300 million of 3.150% senior unsecured notes and to repurchase $250 million of its 4.250% senior unsecured notes.
Through these refinancing, the company eliminated any scheduled debt maturities till November 2023. After these transactions, it had $2.85 billion of liquidity as of Jul 31, 2020. This consisted of full availability on its $2.5-billion revolving credit facility, and nearly $350 million of cash and cash equivalents.
July 2020 Preliminary Updates
At its life science segment, occupancy for July was 96.3%, down 60 basis points (bps) since Jun 30, due to known vacancies. July rent payments improved from June collections, with the company receiving 99% of rents for the month. In June, it finalized short-term deferrals of around $1 million.
At its medical office segment, occupancy for July was 91.1%, stable as compared with Jun 30. The company collected 98% of contractual rents for July. It has deferred $6 million of rents.
In its senior housing operating portfolio, the company continued to witness a decline in move-ins, move-outs, leads and tours. This has likely resulted in spot occupancy declining 110 bps from June to July’s 77.8%.
At its senior housing CCRC portfolio, spot occupancy as of Jul 31 was 79.3%, decreasing 20 bps from June. Further, at its triple-net lease portfolio, the company received 97% of rents and has deferred 3%.
Same-store NOI at the company’s life science segment is projected to be 4-5%, up 100 bps from 3-4% mentioned earlier. Strong leasing, robust mark-to-market, stable rent collections and higher availability of biotech capital funding have driven the increase. Nonetheless, Healthpeak anticipated near-term lease roll and known vacancies to affect same-store occupancy in the second half of the year.
Same-store NOI for the medical office segment and the other segment is expected to be 1-2% and 1.75-2.50%, respectively, unchanged from the prior outlook. Guidance remains withdrawn for the senior housing segment and the total portfolio.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
Currently, Healthpeak has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Healthpeak has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.