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What's in Store for Ventas (VTR) this Earnings Season?

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Healthcare real estate investment trust (“REIT”) Ventas, Inc. (VTR - Free Report) is expected to report first-quarter 2016 results on Apr 29, before the market opens. Last quarter, the company delivered a positive surprise of 1.98%.

For the trailing four quarters, Ventas posted an average positive surprise of 2.74%.  In fact, the stock surpassed the estimates on all four occasions. The Zacks Consensus Estimate for the first-quarter funds from operations (“FFO”) is currently pegged at $1.02.

Let’s see how things have shaped up for this announcement.

Factors to Consider This Quarter

Ventas boasts one of the largest and most diversified portfolios in the healthcare sector with exposure to all types of facilities, which allows it to capitalize on a wide range of opportunities. Also, health expenditure is anticipated to rise in the coming years with senior citizens incurring higher medical expenses compared to the average population. Therefore, in the wake of retiring baby boomers, Ventas is expected to benefit from this trend.

However, in recent times, Ventas has undertaken a spate of acquisition and redevelopment activities. Though beneficial over the long term, such activities entail huge expenses that will affect the company’s near-term performance to some extent.

Earnings Whispers

Our proven model does not conclusively show that Ventas will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:  Both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at $1.02, which translates into an Earnings ESP of 0.00%.

Zacks Rank: Ventas’ Zacks Rank #3 (Hold), when combined with 0.00% Earnings ESP, makes surprise prediction difficult.

Note that, we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a few stocks in the REIT sector you may want to consider, as our model shows that they have the right combination of elements to post a positive surprise this quarter:

Essex Property Trust Inc. (ESS - Free Report) has an Earnings ESP of +1.14% and a Zacks Rank #2. The company will report results on Apr 28.

Taubman Centers, Inc. (TCO - Free Report) has an Earnings ESP of +3.53% and a Zacks Rank #3. The company will release results on May 2.

Vornado Realty Trust (VNO - Free Report) has an Earnings ESP of +2.44% and a Zacks Rank #3. The company will report first-quarter 2016 results on May 2.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. All earnings per share numbers presented in this write up represent FFO per share.

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