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Welltower (WELL) Q2 FFO and Revenues Top Estimates, SSNOI Up

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Welltower Inc. (WELL - Free Report) reported normalized funds from operations (FFO) per share of $1 for second-quarter 2018, beating the Zacks Consensus Estimate by a whisker. However, on a year-over-year basis, the figure compares unfavorably with the year-ago tally of $1.06.

Results solid higher residential fees and services revenues, as well as higher same-store net operating income (SSNOI).

Moreover, the company posted revenues of nearly $1.13 billion, which outpaced the Zacks Consensus Estimate of $1.10 billion. It also compares favorably with the year-ago number of $1.06 billion.

Quarter in Detail

Total portfolio SSNOI inched up 1.4% year over year, mainly driven by growth in seniors housing triple-net, outpatient medical and long-term/post-acute care segments.

Welltower accomplished $251 million of pro-rata gross investments in the second quarter. This included $172 million in acquisitions/joint ventures, $75 million in development funding, as well as $5 million in loans. Notably, the company completed 100% of these investments with existing relationships.

On the other hand, the company accomplished total dispositions of $67 million in the reported quarter. This comprised loan payoffs of $12 million and property sales of $55 million.

The company exited the June-end quarter with $215 million of cash and cash equivalents, down from $442 million recorded at the end of the prior-year quarter. In addition, as of Jun 30, 2018, the company had $2.5 billion of available borrowing capacity under its primary unsecured credit facility.

Dividend Update

Welltower announced a cash dividend of 87 cents per share for the second quarter. The dividend will be paid on Aug 21,to stockholders of record on Aug 7, 2018. This marks the company’s 189th consecutive quarterly cash dividend payout to stockholders.

2018 Outlook

Welltower updated its normalized FFO per share outlook to $3.99-$4.06 from the previous range of $3.95-$4.05 for 2018.

Also, the company anticipates its 2018 average blended same-store net operating income growth of around 1-2%. Further, the company increased its 2018 disposition proceeds projection to $2.4 billion from $1.9 billion guided earlier.

Our Take

Welltower recently closed the acquisition of QCP and partnered with ProMedica Health System for the transition of HCR ManorCare operations. This partnership is a strategic fit. It spans the entire spectrum of care, including wellness, post-acute, assisted living, memory care, hospice and home health, and gives the company solid scope to capitalize on the individual market dynamics.

Nonetheless, the seniors housing market remains challenging. Additionally, rate hike is a concern for Welltower due to its high exposure to long-term leased assets. Stiff competition and effects of increased dispositions on earnings add to its woes.

Welltower Inc. Price, Consensus and EPS Surprise
 

Welltower Inc. Price, Consensus and EPS Surprise | Welltower Inc. Quote

Currently, Welltower has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Vornado Realty Trust (VNO - Free Report) , Boston Properties (BXP - Free Report) and Extra Space Storage (EXR - Free Report) . While Vornado will report Q2 figures on Jul 30, the other two companies are scheduled to release their quarterly numbers on Jul 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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