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Healthpeak (PEAK) Up 4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Healthpeak (PEAK - Free Report) . Shares have added about 4% 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 Q3 FFO Beats, Revenues Miss Estimates, NOI Down

Healthpeak reported third-quarter 2020 FFO as adjusted of 40 cents per share, surpassing the Zacks Consensus Estimate of 39 cents. 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 $597.7 million, missing the Zacks Consensus Estimate of $606.8 million. Nonetheless, the figure was higher than the year-ago number of 537.9 million.

Higher operating expenses and the dismal performance of its senior housing segment affected results.

Behind the Headlines

Healthpeak witnessed a year-over-year decline of 2.8% in the three-month cash same-store portfolio (SPP) NOI. It registered 5.5% growth in life-science cash NOI, a 3.3% rise in the medical office segment and 0.8% advancement in other non-reportable segments. However, senior-housing segment cash NOI fell 6.3%.

The company witnessed year-over-year occupancy declines across all segments during the third quarter. In fact, occupancy at senior housing triple net and SHOP segment declined 630 basis points and 710 bps, year over year, to 81.5% and 83.4%, respectively. Over the same time period, occupancy at the company’s life science and medical office segment declined 140 bps and 30 bps, to 96% and 91.8%, respectively.

Portfolio Activity

During the July-September period, the company acquired a 7-property medical office portfolio, spanning 439,000 square feet, for $169 million and another medical office building, spanning 107,000 square feet, in Scottsdale, AZ for $27 million.

During the September-end quarter, Healthpeak closed sales of medical office and other assets for $15 million. Moreover, it is in various stages for the sale of more than $4 billion of SHOP and triple-net leased assets.

In September 2020, the company signed a 10-year lease for 118,000 square feet at the Boardwalk life-science development project in San Diego, CA. Notably, the 192,000-square-foot development project is now fully pre-leased.

Liquidity

Healthpeak had cash and cash equivalents of $197.1 million as of Sep 30, 2020, up from $144.2 million recorded at the end of 2019.

Moreover, as of Oct 30, 2020, the company’s $2.6-billion liquidity consisted of $2.4 billion of availability on its $2.5-billion revolving credit facility, and around $150 million of cash and cash equivalents.

Outlook

Same-store NOI at the company’s life science segment is projected to be up 5.25-5.75% year over year, as compared with 4-5% mentioned earlier. Strong leasing, robust mark-to-market and owe-than-expected bad debts have driven the increase.

Same-store NOI for the medical office segment is expected to improve 1.75-2.25% year over year, as compared with 1-2% mentioned earlier. Moreover, same-store NOI for the company’s other segment is expected to improve 1.75-2.50% year over year, unchanged from the prior outlook. Guidance remains withdrawn for the senior housing segment and the total portfolio.

Total stabilized SHOP occupancy is expected to fall 100-200 bps in the fourth quarter. Moreover, COVID-19 related expenses for SHOP is projected to be $5 million in the December-end quarter.

October 2020 Preliminary Updates

At its life science segment, occupancy for October was 96.7%, up 40 bps since Sep 30. October rent payments were in line with September collections, with the company receiving 99% of rents for the month.

At its medical office segment, occupancy for October was 90.7%, stable as compared with Sep 30. The company collected 98% of contractual rents for the month, which is marginally better than September receipts.

In its senior housing operating portfolio, it continued to witness a decline in move-ins, leads and tours. This likely resulted in occupancy declining 10 bps from September to 75.1%.

At its senior housing CCRC portfolio, total occupancy declined 20 bps from September to 79.4%. Further, at its triple-net lease portfolio, the company received 97% of rents and has deferred 3%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Healthpeak has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Healthpeak has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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