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HCP Meets Q4 FFO Estimates, Misses on Revenues, Issues View

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HCP Inc. (HCP - Free Report) reported fourth-quarter 2018 funds from operations (FFO) as adjusted of 43 cents per share, meeting the Zacks Consensus Estimate. Comparable FFO as adjusted in the prior-year quarter was 48 cents per share.

Results were supported by decent performance of the company’s life-science, senior-housing triple-net and medical-office segment.

This healthcare real estate investment trust (REIT) generated revenues of $441.9 million, missing the Zacks Consensus Estimate of $447.9 million. Further, the figure compares unfavorably with the year-ago number of $443.2 million.

For full-year 2018, FFO as adjusted per share came in at $1.82, down 6.7% year over year, and in line with the Zacks Consensus Estimate. Revenues for the year marginally declined year over year to $1.84 billion. The reported tally missed the Zacks Consensus Estimate of $1.85 billion.

Behind the Headlines

HCP witnessed 1.5% year-over-year rise in the three-month cash SPP net operating income (NOI). There was 3.9% growth in life-science cash NOI, 2.5% increase in senior-housing triple-net segment, 1.9% rise in the medical office segment and 4.3% advancement in other non-reportable segments. However, these positives were partly offset by a 11.6% decrease in senior-housing operating portfolio (SHOP) cash NOI.

During the quarter under review, HCP completed the previously-announced sales of 19 senior housing communities for $377 million and Shoreline Technology Center for gross proceeds of $1 billion.

In 2018, management of 38 senior-housing communities, owned by HCP, was transitioned from Brookdale to other operators.

HCP had cash and cash equivalents of around $110.8 million as of Dec 31, 2018, significantly up from $55.3 million recorded at the end of 2017. Additionally, the company ended the fourth quarter with $1.9 billion available under its $2-billion credit facility.

Outlook

HCP provided its 2019 FFO as adjusted guidance at $1.70-$1.76 per share. The Zacks Consensus Estimate is pegged at $1.76.

Furthermore, the company expects 2019 SPP cash NOI growth for total portfolio to be 1.25-2.75%.

Conclusion

In fourth-quarter 2018, HCP made diligent efforts to strengthen its balance sheet. Through its ATM program, the company raised gross proceeds of $156 million and completed the common stock offering of 17 million shares in a public offering.

Nevertheless, it witnessed a decline in interest income, as well as resident fees and services revenues, as compared to the prior-year quarter. Going forward, we identify rising interest rates and stiff competition as major hurdles for the company.

HCP, Inc. Price, Consensus and EPS Surprise
 

HCP currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Ventas, Inc. (VTR - Free Report) reported fourth-quarter 2018 normalized FFO of 96 cents, beating the Zacks Consensus Estimate of 95 cents. However, the figure came in lower than the year-ago tally of $1.03.

Alexandria Real Estate Equities, Inc. (ARE - Free Report) recorded fourth-quarter 2018 adjusted FFO of $1.68 per share, missing the Zacks Consensus Estimate by a whisker.

Boston Properties Inc.’s (BXP - Free Report) fourth-quarter 2018 FFO per share of $1.59 also missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.

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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