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Healthcare Realty (HR) Q1 FFO Meets Estimates, Revenues Beat

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Healthcare Realty Trust (HR - Free Report) reported first-quarter 2018 normalized funds from operations (FFO) per share of 40 cents, in line with the Zacks Consensus Estimate. On a year-over-year basis, FFO per share increased by a penny.

Results indicated improved same-store revenues, partially offset by higher operating expenses.

Total revenues of $112.1 million in the reported quarter surpassed the Zacks Consensus Estimate of $110.7 million. Further, the figure was up 7.1% from the prior-year quarter.

Results in Detail

For the trailing 12-month period ended Mar 31, 2018, same-store revenues improved 3.1%, operating expenses inched up 2.3% and same-store net operating income increased 3.5%. Further, same-store revenues per average occupied square foot grew 2.7% while average same-store occupancy expanded 30 basis points (bps) from the prior year to 89.4%.

First-quarter leasing activity included 128 leases and aggregated 463,000 square feet of space. This comprised 316,000 square feet of renewals, and 147,000 square feet of new and expansion leases.

For the reported quarter, in the company’s same-store multi-tenant portfolio, contractual rent increases averaged 2.8% while cash leasing spreads were 5.2% on 247,000 square feet renewed. Moreover, tenant retention was 81.5% and the average yield on renewed leases advanced 60 bps.

The company exited the first quarter with cash and cash equivalents of $3.8 million, down from $6.2 million recorded at the end of the year-ago quarter.

Dividend Update

On May 1, the company announced a quarterly cash dividend of 30 cents per share. This dividend will be paid on May 31 to stockholders of record as of May 16, 2018.  This dividend is equivalent to 75% of normalized FFO per share.

Our Take

Healthcare Realty’s solid operating performance mirrors encouraging prospects for the company. The aging baby-boomer generation and greater longevity will likely augment demand for healthcare facilities.

However, intense competition and estimated hike in interest rates are expected to curtail the company’s growth momentum in the near term.

Healthcare Realty currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Healthcare Realty Trust Incorporated Price, Consensus and EPS Surprise

 

We are now looking forward to the earnings releases of EPR Properties (EPR - Free Report) , Jones Lang LaSalle Inc. (JLL - Free Report) and Realty Income Corp. (O - Free Report) . All of these are scheduled to report their numbers on May 8.

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.

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