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Here's Why Ventas (VTR) is an Apt Pick for Your Portfolio
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Ventas, Inc. (VTR - Free Report) owns a well-diversified portfolio of healthcare real estate assets. In the wake of the pandemic, the company’s senior housing operations portfolio (SHOP) has been benefiting from the positive operating trend of the senior housing industry. Also, the increasing longevity of the aging U.S. population and biopharma drug development opportunities bolstered its life-science segment’s growth.
Shares of this Chicago, IL-based healthcare real estate investment trust (REIT) have gained 5.9% in the past three months against the industry’s decline of 0.6%.
Analysts, too, seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for VTR’s 2023 funds from operations (FFO) per share has moved 1% northward over the past two months to $2.98. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
What Makes Ventas a Solid Pick?
Favorable SHOP Dynamics: Amid the recovery in the senior housing industry, Ventas’ SHOP segment is witnessing a rise in move-in rates, aiding occupancy levels. Also, strong pricing power and moderating expenses have been fueling net operating income (NOI) growth for this segment. The same-store cash NOI for the SHOP portfolio climbed 17.4% year over year in the first quarter of 2023.
Moreover, the healthcare expenditure by senior citizens, who constitute a major customer base of healthcare services and incur higher healthcare expenditures than the average population, is projected to rise in the coming years.
Therefore, leveraging the pent-up demand, favorable demographic trend for the senior housing industry and muted new supply in its markets, Ventas is well-prepared for a compelling multiyear growth opportunity. Per our estimate, its SHOP’s NOI will rise 8.9% in 2023.
Accretive Research & Innovation Investments: To capitalize on the growing need for research related to life-saving vaccines and therapeutics, VTR has been bolstering its Research & Innovation (R&I) business via accretive investments and acquisitions.
In recent years, the life-science industry has benefited from the increasing life expectancy of the United States population and biopharma drug development growth opportunities. As a result, higher demand for life-science real-estate assets is expected to drive demand for Ventas’ life-science R&I portfolio, leading to healthy leasing activity.
Per the June 2023 Nareit REITweek Investor Presentation, as of Mar 31, 2023, Ventas owned or had investments in its life science, R&I portfolio, including developments underway, spanning around 11.3 million.
Solid Tenant Base: Ventas’ long-lease terms with top-rated tenants assure stable revenue generation for the company. Per the June 2023 Nareit REITweek Investor Presentation, top-tier universities and companies accounted for 73% of the company’s annual rent. Of this, 47% was from investment-grade universities and 26% from investment-grade or public companies with a market capitalization of more than $1 billion, including leading life science tenants.
Promising Office Segment Growth: The company’s office segment, which includes medical office buildings (MOBs), academic medical and R&I businesses, is benefiting from the rising need for healthcare services and growing outpatient trends. This uptrend is estimated to continue, boding well for this segment. Notably, the first quarter of 2023 was the seventh consecutive quarter wherein the MOB segment’s occupancy and NOI margin grew.
Balance Sheet Strength: Ventas maintains a healthy balance sheet position and takes appropriate measures to enhance its liquidity position and financial strength. As of Mar 31, 2023, its liquidity totaled $2.4 billion of liquidity and the net debt to further adjusted EBITDA was 6.9X.
In addition, the long-term credit ratings of Baa1 from Moody’s and BBB+ from Fitch and S&P Global render the company easy access to the debt market at favorable costs. With enough financial flexibility, Ventas is well-positioned to capitalize on growth opportunities.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Host Hotels & Resorts (HST - Free Report) , Omega Healthcare Investors (OHI - Free Report) and Ryman Hospitality Properties (RHP - Free Report) . While Host Hotels & Resorts sports a Zacks Rank #1, Omega Healthcare and Ryman Hospitality carry a Zacks Rank #2.
The Zacks Consensus Estimate for Host Hotels’ current-year funds from operations (FFO) per share has moved 1.6% northward over the past two months to $1.91.
The Zacks Consensus Estimate for Omega Healthcare’ ongoing year’s FFO per share has been raised 1.1% over the past week to $2.80.
The Zacks Consensus Estimate for Ryman Hospitality’ 2023 FFO per share has moved 1.9% upward in the past month to $7.31.
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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Here's Why Ventas (VTR) is an Apt Pick for Your Portfolio
Ventas, Inc. (VTR - Free Report) owns a well-diversified portfolio of healthcare real estate assets. In the wake of the pandemic, the company’s senior housing operations portfolio (SHOP) has been benefiting from the positive operating trend of the senior housing industry. Also, the increasing longevity of the aging U.S. population and biopharma drug development opportunities bolstered its life-science segment’s growth.
Shares of this Chicago, IL-based healthcare real estate investment trust (REIT) have gained 5.9% in the past three months against the industry’s decline of 0.6%.
Analysts, too, seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for VTR’s 2023 funds from operations (FFO) per share has moved 1% northward over the past two months to $2.98. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
What Makes Ventas a Solid Pick?
Favorable SHOP Dynamics: Amid the recovery in the senior housing industry, Ventas’ SHOP segment is witnessing a rise in move-in rates, aiding occupancy levels. Also, strong pricing power and moderating expenses have been fueling net operating income (NOI) growth for this segment. The same-store cash NOI for the SHOP portfolio climbed 17.4% year over year in the first quarter of 2023.
Moreover, the healthcare expenditure by senior citizens, who constitute a major customer base of healthcare services and incur higher healthcare expenditures than the average population, is projected to rise in the coming years.
Therefore, leveraging the pent-up demand, favorable demographic trend for the senior housing industry and muted new supply in its markets, Ventas is well-prepared for a compelling multiyear growth opportunity. Per our estimate, its SHOP’s NOI will rise 8.9% in 2023.
Accretive Research & Innovation Investments: To capitalize on the growing need for research related to life-saving vaccines and therapeutics, VTR has been bolstering its Research & Innovation (R&I) business via accretive investments and acquisitions.
In recent years, the life-science industry has benefited from the increasing life expectancy of the United States population and biopharma drug development growth opportunities. As a result, higher demand for life-science real-estate assets is expected to drive demand for Ventas’ life-science R&I portfolio, leading to healthy leasing activity.
Per the June 2023 Nareit REITweek Investor Presentation, as of Mar 31, 2023, Ventas owned or had investments in its life science, R&I portfolio, including developments underway, spanning around 11.3 million.
Solid Tenant Base: Ventas’ long-lease terms with top-rated tenants assure stable revenue generation for the company. Per the June 2023 Nareit REITweek Investor Presentation, top-tier universities and companies accounted for 73% of the company’s annual rent. Of this, 47% was from investment-grade universities and 26% from investment-grade or public companies with a market capitalization of more than $1 billion, including leading life science tenants.
Promising Office Segment Growth: The company’s office segment, which includes medical office buildings (MOBs), academic medical and R&I businesses, is benefiting from the rising need for healthcare services and growing outpatient trends. This uptrend is estimated to continue, boding well for this segment. Notably, the first quarter of 2023 was the seventh consecutive quarter wherein the MOB segment’s occupancy and NOI margin grew.
Balance Sheet Strength: Ventas maintains a healthy balance sheet position and takes appropriate measures to enhance its liquidity position and financial strength. As of Mar 31, 2023, its liquidity totaled $2.4 billion of liquidity and the net debt to further adjusted EBITDA was 6.9X.
In addition, the long-term credit ratings of Baa1 from Moody’s and BBB+ from Fitch and S&P Global render the company easy access to the debt market at favorable costs. With enough financial flexibility, Ventas is well-positioned to capitalize on growth opportunities.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Host Hotels & Resorts (HST - Free Report) , Omega Healthcare Investors (OHI - Free Report) and Ryman Hospitality Properties (RHP - Free Report) . While Host Hotels & Resorts sports a Zacks Rank #1, Omega Healthcare and Ryman Hospitality carry a Zacks Rank #2.
The Zacks Consensus Estimate for Host Hotels’ current-year funds from operations (FFO) per share has moved 1.6% northward over the past two months to $1.91.
The Zacks Consensus Estimate for Omega Healthcare’ ongoing year’s FFO per share has been raised 1.1% over the past week to $2.80.
The Zacks Consensus Estimate for Ryman Hospitality’ 2023 FFO per share has moved 1.9% upward in the past month to $7.31.
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.