We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is it Wise to Retain Welltower (WELL) in Your Portfolio Now?
Read MoreHide Full Article
Welltower Inc.’s (WELL - Free Report) diversified portfolio in the healthcare real estate industry is likely to lead its gains amid rising healthcare spending and an aging population. Its senior housing operations (SHO) portfolio is recovering due to widespread vaccination drives.
Welltower’s SHO segment is well-poised to capture the increase in medical expenses borne by senior citizens, which is generally higher than the average population. This trend is expected to continue in the upcoming years in the wake of aging baby boomers.
Customers’ prioritization of healthcare expenses over other discretionary purchases makes the healthcare sector relatively immune to the macroeconomic problems faced by the office, retail and apartment companies. This shields WELL against market volatilities.
To capitalize on tailwinds, Welltower is undertaking strategic acquisitions and capital-recycling measures to improve its SHO portfolio. Through this, it has achieved operator diversification and expanded its footprint in high barrier-to-entry urban markets. During second-quarter 2022, WELL completed the acquisition of Calamar’s 25-property seniors housing portfolio for $502 million. Moreover, the company announced the expansion of its partnership with Oakmont Management Group in May and agreed to purchase seven senior living communities, subject to closing conditions. Stronger demographics and increasing penetration rates have favorably positioned the portfolio for long-term growth.
Welltower maintains a healthy balance-sheet position with ample liquidity to meet near-term obligations and fund its development pipeline. As of Mar 31, 2022, it had $4.1 billion of near-term liquidity. Moreover, in June, it upsized and extended the maturity of its $5.2 billion unsecured credit facility. With a well-laddered debt maturity schedule and investment-grade credit ratings, Welltower holds adequate financial flexibility and has favorable access to the debt market, which aids its expansionary endeavors.
However, the SHO segment is likely to experience a competitive landscape as operators are trying to fill unoccupied units post the pandemic-led broad-based occupancy erosions. Also, the tenant concentration in the company’s triple-net portfolio is concerning.
Further, as part of its portfolio-repositioning and liquidity-enhancing efforts, Welltower is either disposing of its assets or converting properties to RIDEA structures. It completed property dispositions and loan payoffs of $155 million during first-quarter 2022. While such moves reduce its exposure to troubled operators, the dilutive impact on earnings in the near term from asset dispositions cannot be avoided.
Although shares of Welltower have only declined 3% in the past six months compared with the industry’s fall of 19.6%, analysts seem bearish about this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share does not indicate a favorable outlook for the company as it has been marginally revised downward in the past month to $3.52.
The Zacks Consensus Estimate for Host Hotels’ 2022 FFO per share has moved 5.1% upward in the past month to $1.65.
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 7.7% over the past two months to $2.09.
The Zacks Consensus Estimate for Pebblebrook Hotel Trust’s current-year FFO per share has moved 12.5% northward in the past month to $1.80.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Shutterstock
Is it Wise to Retain Welltower (WELL) in Your Portfolio Now?
Welltower Inc.’s (WELL - Free Report) diversified portfolio in the healthcare real estate industry is likely to lead its gains amid rising healthcare spending and an aging population. Its senior housing operations (SHO) portfolio is recovering due to widespread vaccination drives.
Welltower’s SHO segment is well-poised to capture the increase in medical expenses borne by senior citizens, which is generally higher than the average population. This trend is expected to continue in the upcoming years in the wake of aging baby boomers.
Customers’ prioritization of healthcare expenses over other discretionary purchases makes the healthcare sector relatively immune to the macroeconomic problems faced by the office, retail and apartment companies. This shields WELL against market volatilities.
To capitalize on tailwinds, Welltower is undertaking strategic acquisitions and capital-recycling measures to improve its SHO portfolio. Through this, it has achieved operator diversification and expanded its footprint in high barrier-to-entry urban markets. During second-quarter 2022, WELL completed the acquisition of Calamar’s 25-property seniors housing portfolio for $502 million. Moreover, the company announced the expansion of its partnership with Oakmont Management Group in May and agreed to purchase seven senior living communities, subject to closing conditions. Stronger demographics and increasing penetration rates have favorably positioned the portfolio for long-term growth.
Welltower maintains a healthy balance-sheet position with ample liquidity to meet near-term obligations and fund its development pipeline. As of Mar 31, 2022, it had $4.1 billion of near-term liquidity. Moreover, in June, it upsized and extended the maturity of its $5.2 billion unsecured credit facility. With a well-laddered debt maturity schedule and investment-grade credit ratings, Welltower holds adequate financial flexibility and has favorable access to the debt market, which aids its expansionary endeavors.
However, the SHO segment is likely to experience a competitive landscape as operators are trying to fill unoccupied units post the pandemic-led broad-based occupancy erosions. Also, the tenant concentration in the company’s triple-net portfolio is concerning.
Further, as part of its portfolio-repositioning and liquidity-enhancing efforts, Welltower is either disposing of its assets or converting properties to RIDEA structures. It completed property dispositions and loan payoffs of $155 million during first-quarter 2022. While such moves reduce its exposure to troubled operators, the dilutive impact on earnings in the near term from asset dispositions cannot be avoided.
Although shares of Welltower have only declined 3% in the past six months compared with the industry’s fall of 19.6%, analysts seem bearish about this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share does not indicate a favorable outlook for the company as it has been marginally revised downward in the past month to $3.52.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Host Hotels & Resorts (HST - Free Report) , OUTFRONT Media (OUT - Free Report) and Pebblebrook Hotel Trust (PEB - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Host Hotels’ 2022 FFO per share has moved 5.1% upward in the past month to $1.65.
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 7.7% over the past two months to $2.09.
The Zacks Consensus Estimate for Pebblebrook Hotel Trust’s current-year FFO per share has moved 12.5% northward in the past month to $1.80.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.