Healthpeak Properties, Inc. is slated to report second-quarter 2021 earnings on Aug 3, after market close. The company’s results are anticipated to reflect year-over-year declines in 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 40 cents per share, surpassing the Zacks Consensus Estimate by a whisker. While this outperformance was backed by revenue growth, weakness in the continuing care retirement community (CCRC) portfolio had an adverse impact.

Over the preceding four quarters, the company beat the Zacks Consensus Estimate on three occasions and met in the other, the average beat being 1.91%. 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 second-quarter earnings release.

Factors at Play

During second-quarter 2021, vaccine distribution witnessed acceleration and pandemic-related restrictions relaxed.

Since restriction on non-essential visits has been a major bummer for occupancy at senior housing facilities, the latest relaxation is likely to have been a breather for healthcare REITs like Healthpeak, Welltower, Inc. (WELL Quick QuoteWELL - Free Report) , Ventas (VTR Quick QuoteVTR - Free Report) and New Senior Investment Group , which have seniors housing exposures.

While vaccination has gradually brought down the COVID-19 case counts, it did not translate to occupancy revival due to new inventory coming online in the second quarter. Per NIC-MAP’s senior housing data, seniors housing occupancy remained flat at 78.8% during the quarter, while demand for the same improved.

The NIC MAP also reported the first positive quarterly absorption since the first quarter of 2020 and the most positive absorption since 2019.

During the second quarter, annual rent growth sequentially expanded 10 basis points to 1.2% and annual absorption shrunk 320 bps to negative 4.3%. Though the situation has improved since the initial pandemic days, Healthpeak is witnessing lower number of move-ins, which might have dented revenues and NOI.

As the aging demography and increasing life expectancy of the U.S. population continue to drive demand for life-changing therapies and cures, it is offering scope for scientific innovation and biopharma drug development by biotechs. Amid the global efforts to develop life-saving vaccines and therapeutics for coronavirus, the drug research and innovation business continued to witness a robust demand during the April-June period.

The underlying demand drivers are strengthening life-science fundamentals, leasing activity and rent growth. Favorable drug approval trends and high life-science funding are other positives. Amid these, with an existing biotech-heavy tenant base, Healthpeak is seeing decent demand and retention at its lab properties.

The company follows a cluster strategy in three premier life-science epicenters — San Diego, San Francisco and Boston — to assemble assets through acquisitions, developments and redevelopments.

In June, Healthpeak inked a long-term lease with Turning Point Therapeutics, Inc. for the entire Callan Ridge densification project, which was announced this March.

Over the past few years, Healthpeak has significantly reduced the size of both SHOP and triple-net portfolios through divestitures to rebalance portfolio toward life-science and medical office businesses and offer stability to earnings. Though such efforts are strategic fits for the long term, the large-scale dispositions are expected to have reduced cash flows, and resulted in lost revenues and earnings dilution in second-quarter 2021.

Amid the concerns, the consensus estimate for total revenues for the to-be-reported quarter is pegged at $471.5 million, suggesting a year-over-year fall of 19.9%.

Prior to the second-quarter earnings release, there is a lack of any solid catalyst for becoming optimistic about the company’s prospects. The Zacks Consensus Estimate for FFO per share has been unchanged at 39 cents over the past week. It also suggests a 2.5% 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 -0.11%.

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.