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Can Life-Science Assets Aid Healthpeak's (PEAK) Q1 Earnings?
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Healthpeak Properties,Inc. is scheduled to report first-quarter 2021 earnings on May 4, after market close. The company’s results are expected to reflect a year-over-year decline in quarterly revenues and funds from operations (FFO) per share.
In the last reported quarter, the healthcare real estate investment trust (REIT) posted FFO as adjusted of 41 cents per share, surpassing the Zacks Consensus Estimate of 40 cents. While the performance of the life-science and medical office segments supported results, higher operating expenses and the dismal performance of its senior housing segment were spoilsports.
Over the preceding four quarters, the company beat the Zacks Consensus Estimate on three occasions and met in the other, the average beat being 1.83%. The graph below depicts this surprise history:
Healthpeak Properties, Inc. Price and EPS Surprise
Let’s see how things have shaped up prior to the first-quarter earnings release.
Factors at Play
In first-quarter 2021, the pace of vaccine administration among senior housing residents increased. Moreover, the majority of senior housing communities restarted accepting admission and in-person tour activities. In fact, in March, the Centers for Medicare & Medicaid Services relaxed restrictions on senior housing visitations, given the high vaccination rates among senior housing residents.
Since restriction on non-essential visits has been a major bummer for occupancy at senior housing facilities, the relaxation is likely to have been a breather for healthcare REITs like Healthpeak, Welltower, Inc. (WELL - Free Report) , Ventas (VTR - Free Report) and New Senior Investment Group , which have seniors housing exposures.
While vaccination has reduced COVID-19 case counts, it has not translated to occupancy revival and this continued to cast a pall on senior housing fundamentals in first-quarter 2021. NIC-MAP’s first-quarter 2021 senior housing data reiterates these concerns, with report indicating seniors housing occupancy plunging to a record-low of 78.8% in first-quarter 2021. This marks a decline of roughly 180 basis points (bps) from the previous quarter. This also marks the sixth consecutive quarter of occupancy decline and the fourth one since the onset of the pandemic.
Moreover, annual rent growth and annual absorption sequentially fell 70 bps and 190 bps to 0.9% and negative 7.4%, respectively.
As for Healthpeak, we note that 11% of the company’s total portfolio income is generated from continuing care retirement community or CCRCs. Moreover, on Dec 31, 2020, the company inferred that the planned dispositions of SHOP and senior housing triple-net assets represented a strategic shift. Hence related operating results should be regarded as discontinued operations and have been removed from the same-store portfolio.
At its CCRC portfolio, the company is expected to have seen a modest decline in occupancy in the first quarter. Notably, occupancy at its CCRC assets was up 20 bps in January from 81.4% as of 2020 end, while down 55 bps in February.
Low occupancy is expected to have resulted in revenue erosion in the first quarter. Moreover, COVID-related seniors housing expenses are likely to have been high on account of higher sanitation activities, protective gears and preventive efforts.
Additionally, over the past few years, Healthpeak has significantly reduced senior housing exposure through divestitures to rebalance portfolio toward life science and medical office businesses. In line with this, in fourth-quarter 2020, the company closed 12 transactions for gross proceeds of $2.5 billion. The large-scale dispositions are likely to have reduced cash flows, and resulted in lost revenues and earnings dilution in first-quarter 2021.
Amid the concerns, the consensus mark for total revenues for the first quarter is pegged at $544.9 million, suggesting a year-over-year decline of 6.9%.
Nonetheless, Healthpeak has significant investments in life science and medical office assets. These segments are anticipated to have counterweighed the lagged performance of the CCRC assets and aided results.
Markedly, the aging demography and increasing life expectancy of the U.S. population have been driving the demand for life-changing therapies and cures. This has been offering scope for scientific innovation and biopharma drug development by biotechs. Moreover, in light of the global efforts to develop vaccines and treatments for coronavirus, the demand for drug innovation continued to be robust in first-quarter 2021.
The underlying demand drivers are likely to have strengthened life-science market fundamentals, leasing activity and rent growth. Also, favorable drug approval trends and high life-science funding have been positives. Amid this, with an existing biotech-heavy tenant base, Healthpeak witnessed decent demand and retention at its lab properties. In fact, cash receipts for January and February were more than 99%, which is in line with the prior years.
At its medical office portfolio, the company witnessed more-than-expected occupancy, retention and renewal spreads, backed by robust leasing activity. Similar to the life-science portfolio, cash receipts for January and February of 99% and 98%, respectively, were in line with previous years.
However, prior to the first-quarter earnings release, there is a lack of any solid catalyst for becoming optimistic about the company’s prospects. Markedly, the Zacks Consensus Estimate for first-quarter FFO per share has been unchanged at 39 cents over the past month. It also suggests a 13.3% year-over-year decline.
Here is what our quantitative model predicts:
Healthpeak does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of a FFO beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Healthpeak is 0.00%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Can Life-Science Assets Aid Healthpeak's (PEAK) Q1 Earnings?
Healthpeak Properties, Inc. is scheduled to report first-quarter 2021 earnings on May 4, after market close. The company’s results are expected to reflect a year-over-year decline in quarterly revenues and funds from operations (FFO) per share.
In the last reported quarter, the healthcare real estate investment trust (REIT) posted FFO as adjusted of 41 cents per share, surpassing the Zacks Consensus Estimate of 40 cents. While the performance of the life-science and medical office segments supported results, higher operating expenses and the dismal performance of its senior housing segment were spoilsports.
Over the preceding four quarters, the company beat the Zacks Consensus Estimate on three occasions and met in the other, the average beat being 1.83%. The graph below depicts this surprise history:
Healthpeak Properties, Inc. Price and EPS Surprise
Healthpeak Properties, Inc. price-eps-surprise | Healthpeak Properties, Inc. Quote
Let’s see how things have shaped up prior to the first-quarter earnings release.
Factors at Play
In first-quarter 2021, the pace of vaccine administration among senior housing residents increased. Moreover, the majority of senior housing communities restarted accepting admission and in-person tour activities. In fact, in March, the Centers for Medicare & Medicaid Services relaxed restrictions on senior housing visitations, given the high vaccination rates among senior housing residents.
Since restriction on non-essential visits has been a major bummer for occupancy at senior housing facilities, the relaxation is likely to have been a breather for healthcare REITs like Healthpeak, Welltower, Inc. (WELL - Free Report) , Ventas (VTR - Free Report) and New Senior Investment Group , which have seniors housing exposures.
While vaccination has reduced COVID-19 case counts, it has not translated to occupancy revival and this continued to cast a pall on senior housing fundamentals in first-quarter 2021. NIC-MAP’s first-quarter 2021 senior housing data reiterates these concerns, with report indicating seniors housing occupancy plunging to a record-low of 78.8% in first-quarter 2021. This marks a decline of roughly 180 basis points (bps) from the previous quarter. This also marks the sixth consecutive quarter of occupancy decline and the fourth one since the onset of the pandemic.
Moreover, annual rent growth and annual absorption sequentially fell 70 bps and 190 bps to 0.9% and negative 7.4%, respectively.
As for Healthpeak, we note that 11% of the company’s total portfolio income is generated from continuing care retirement community or CCRCs. Moreover, on Dec 31, 2020, the company inferred that the planned dispositions of SHOP and senior housing triple-net assets represented a strategic shift. Hence related operating results should be regarded as discontinued operations and have been removed from the same-store portfolio.
At its CCRC portfolio, the company is expected to have seen a modest decline in occupancy in the first quarter. Notably, occupancy at its CCRC assets was up 20 bps in January from 81.4% as of 2020 end, while down 55 bps in February.
Low occupancy is expected to have resulted in revenue erosion in the first quarter. Moreover, COVID-related seniors housing expenses are likely to have been high on account of higher sanitation activities, protective gears and preventive efforts.
Additionally, over the past few years, Healthpeak has significantly reduced senior housing exposure through divestitures to rebalance portfolio toward life science and medical office businesses. In line with this, in fourth-quarter 2020, the company closed 12 transactions for gross proceeds of $2.5 billion. The large-scale dispositions are likely to have reduced cash flows, and resulted in lost revenues and earnings dilution in first-quarter 2021.
Amid the concerns, the consensus mark for total revenues for the first quarter is pegged at $544.9 million, suggesting a year-over-year decline of 6.9%.
Nonetheless, Healthpeak has significant investments in life science and medical office assets. These segments are anticipated to have counterweighed the lagged performance of the CCRC assets and aided results.
Markedly, the aging demography and increasing life expectancy of the U.S. population have been driving the demand for life-changing therapies and cures. This has been offering scope for scientific innovation and biopharma drug development by biotechs. Moreover, in light of the global efforts to develop vaccines and treatments for coronavirus, the demand for drug innovation continued to be robust in first-quarter 2021.
The underlying demand drivers are likely to have strengthened life-science market fundamentals, leasing activity and rent growth. Also, favorable drug approval trends and high life-science funding have been positives. Amid this, with an existing biotech-heavy tenant base, Healthpeak witnessed decent demand and retention at its lab properties. In fact, cash receipts for January and February were more than 99%, which is in line with the prior years.
At its medical office portfolio, the company witnessed more-than-expected occupancy, retention and renewal spreads, backed by robust leasing activity. Similar to the life-science portfolio, cash receipts for January and February of 99% and 98%, respectively, were in line with previous years.
However, prior to the first-quarter earnings release, there is a lack of any solid catalyst for becoming optimistic about the company’s prospects. Markedly, the Zacks Consensus Estimate for first-quarter FFO per share has been unchanged at 39 cents over the past month. It also suggests a 13.3% year-over-year decline.
Here is what our quantitative model predicts:
Healthpeak does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of a FFO beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Healthpeak is 0.00%.
Zacks Rank: It currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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