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Welltower (WELL) to Witness a Dim Q3 Amid Delayed HHS Funds
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Welltower Inc.’s (WELL - Free Report) management expects third-quarter 2022 normalized funds from operations (FFO) per diluted share to lie below the midpoint of the guidance of 82-87 cents. This is primarily due to the delay in the disbursements of Health and Human Services (HHS) funds. The Zacks Consensus Estimate for the same is currently pegged at 85 cents.
Welltower expects to realize around $2.4 million from HHS Provider Relief Fund compared with nearly $7 million assumed in the company’s guidance. This is likely to result in a reduction of approximately 1 cent per diluted share from expectations.
Moreover, higher interest rates and a stronger U.S. dollar are anticipated to lead to an additional headwind of around 0.5 cents to normalized FFO per diluted share, mainly attributable to the movement in foreign exchange rates. This compared unfavorably with WELL’s guidance of 3 cents for second-quarter 2022 and 4 cents for third-quarter 2021, respectively.
The trend is likely to continue in fourth-quarter 2022 as well. Assuming that the forward interest rate curve and exchange rates remain at current levels, Welltower anticipates an additional headwind of 3 cents per diluted share due to higher interest rates and a stronger U.S. dollar, sequentially.
Shares of this Zacks Rank #3 (Hold) stock have lost 23.7% over the past three months compared with the industry's decline of 10.7%.
Image Source: Zacks Investment Research
Nonetheless, WELL’s seniors housing operating (SHO) portfolio is well-poised to benefit from an aging population and a rise in healthcare expenditure by this age cohort. The significant decline in construction starts and slower net inventory growth are likely to drive the occupancy for WELL’s properties in the future.
The SHO portfolio has witnessed a sizeable recovery, with average occupancy levels outpacing the pre-pandemic averages. Per the October business update, the company expects the year-over-year average occupancy growth for third-quarter 2022 to be in line with its previous expectation of around more than 400 basis points.
Welltower is focused on strategic portfolio optimization and synergistic collaborations with health systems to invest in the next-generation assets of health and wellness care delivery. Its near-term capital deployment pipeline remains strong.
In the third quarter of 2022, WELL completed nearly $850 million of pro rata gross investments. In addition, since October 2020, it announced or completed approximately $8.6 billion of capital deployment with an initial yield of 5.9% and a stable yield of roughly 7.8%.
Welltower’s liquidity profile at the end of third-quarter 2022 was encouraging, with combined proceeds from unsettled equity issuances and expected dispositions and loan payoffs approaching $2.0 billion. This provides the company with significant investment capacity at an attractive cost of capital.
The Zacks Consensus Estimate for Public Storage’s current-year FFO per share has moved marginally northward in the past month to $15.73.
The Zacks Consensus Estimate for Host Hotels & Resorts’ ongoing year’s FFO per share has been raised 2.9% over the past month to $1.80.
The Zacks Consensus Estimate for Xenia Hotels & Resorts’ 2022 FFO per share has moved 7.4% upward in the past two months to $1.59.
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.
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Welltower (WELL) to Witness a Dim Q3 Amid Delayed HHS Funds
Welltower Inc.’s (WELL - Free Report) management expects third-quarter 2022 normalized funds from operations (FFO) per diluted share to lie below the midpoint of the guidance of 82-87 cents. This is primarily due to the delay in the
disbursements of Health and Human Services (HHS) funds. The Zacks Consensus Estimate for the same is currently pegged at 85 cents.
Welltower expects to realize around $2.4 million from HHS Provider Relief Fund compared with nearly $7 million assumed in the company’s guidance. This is likely to result in a reduction of approximately 1 cent per diluted share from expectations.
Moreover, higher interest rates and a stronger U.S. dollar are anticipated to lead to an additional headwind of around 0.5 cents to normalized FFO per diluted share, mainly attributable to the movement in foreign exchange rates. This compared unfavorably with WELL’s guidance of 3 cents for second-quarter 2022 and 4 cents for third-quarter 2021, respectively.
The trend is likely to continue in fourth-quarter 2022 as well. Assuming that the forward interest rate curve and exchange rates remain at current levels, Welltower anticipates an additional headwind of 3 cents per diluted share due to higher interest rates and a stronger U.S. dollar, sequentially.
Shares of this Zacks Rank #3 (Hold) stock have lost 23.7% over the past three months compared with the industry's decline of 10.7%.
Image Source: Zacks Investment Research
Nonetheless, WELL’s seniors housing operating (SHO) portfolio is well-poised to benefit from an aging population and a rise in healthcare expenditure by this age cohort. The significant decline in construction starts and slower net inventory growth are likely to drive the occupancy for WELL’s properties in the future.
The SHO portfolio has witnessed a sizeable recovery, with average occupancy levels outpacing the pre-pandemic averages. Per the October business update, the company expects the year-over-year average occupancy growth for third-quarter 2022 to be in line with its previous expectation of around more than 400 basis points.
Welltower is focused on strategic portfolio optimization and synergistic collaborations with health systems to invest in the next-generation assets of health and wellness care delivery. Its near-term capital deployment pipeline remains strong.
In the third quarter of 2022, WELL completed nearly $850 million of pro rata gross investments. In addition, since October 2020, it announced or completed approximately $8.6 billion of capital deployment with an initial yield of 5.9% and a stable yield of roughly 7.8%.
Welltower’s liquidity profile at the end of third-quarter 2022 was encouraging, with combined proceeds from unsettled equity issuances and expected dispositions and loan payoffs approaching $2.0 billion. This provides the company with significant investment capacity at an attractive cost of capital.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Public Storage (PSA - Free Report) , Host Hotels & Resorts (HST - Free Report) and Xenia Hotels & Resorts (XHR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Public Storage’s current-year FFO per share has moved marginally northward in the past month to $15.73.
The Zacks Consensus Estimate for Host Hotels & Resorts’ ongoing year’s FFO per share has been raised 2.9% over the past month to $1.80.
The Zacks Consensus Estimate for Xenia Hotels & Resorts’ 2022 FFO per share has moved 7.4% upward in the past two months to $1.59.
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.