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What's in the Cards for Medical Properties' (MPW) Q3 Earnings?

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Medical Properties Trust, Inc.  (MPW - Free Report) — also known as MPT — is scheduled to report third-quarter 2019 results on Oct 31, before the market opens. While its revenues are expected to reflect year-over-year improvement, funds from operations (FFO) per share will likely display a decline.

In the last reported quarter, this self-advised real estate investment trust (REIT), which acquires and develops net-leased healthcare facilities, posted normalized funds from operations (NFFO) per share of 31 cents, in line with the Zacks Consensus Estimate.

The company delivered an average negative surprise of 0.05%, in the last four quarters, meeting estimates twice, missing on one occasion and surpassing in the other. The graph below depicts this surprise history:

Medical Properties Trust, Inc. Price and EPS Surprise
 

 

Let’s see how things are shaping up prior to this announcement.

Amid favorable acquisition market, MPT announced completed and pending transactions aggregating more than $3 billion, during the first nine months of 2019. These acquisitions at accretive cap rates have likely strengthened its fundamentals. The company is expected to have realized benefits of these transactions in third-quarter 2019.

The acquisitions across different countries are a strategic fit as these offer geographic diversification, thereby, reducing the impact of the government’s healthcare legislation changes. Further, the rapidly-expanding opportunities in the acute healthcare real estate sector offer significant potential for domestic and international acquisition targets.

In fact, in August, the company completed the acquisitions of real estate interests in 16 hospitals operated by Prospect Medical Holdings, Inc. and eight U.K. hospitals operated by Ramsay Health Care.

The U.K acquisition was done for a purchase consideration of around $434 million. The hospitals are leased under an in-place net lease, with roughly 18-year remaining lease term and carry annual fixed and periodic market-based escalations.

Moreover, the acquisition of Prospect-operated hospitals includes 14 acute care hospitals and two behavioral health hospital facilities for $1.55 billion.

Also, the Zacks Consensus Estimate for third-quarter revenues is pegged at $203.6 million. This represents a year-over-year improvement of 3.4% from the year-earlier quarter’s reported tally.

Lastly, prior to the third-quarter earnings release, the company has been witnessing upward estimate revisions, indicating bullish analyst sentiments. As such, the Zacks Consensus Estimate of FFO per share for the quarter under review has been revised 3.2% upward to 32 cents over the past month. However, it represents a year-over-year decline of 8.6%.

Earnings Whispers

Our proven model predicts a positive surprise in terms of FFO per share for MPT this time around. A positive Earnings ESP is a meaningful and leading indicator of a likely beat. This, when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), makes us reasonably confident of a positive surprise.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: MPT’s Earnings ESP is +4.21%.

Zacks Rank: The company currently carries a Zacks Rank of 2.

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

Stocks That Warrant a Look

Digital Realty Trust, Inc. (DLR - Free Report) , scheduled to release earnings on Oct 29, has an Earnings ESP of +2.61% and carries a Zacks Rank of 3, at present.

Senior Housing Properties Trust (SNH - Free Report) , slated to report July-September quarter results on Nov 7, has an Earnings ESP of +3.23% and currently holds a Zacks Rank of 2.

Stag Industrial, Inc. (STAG - Free Report) , set to release quarterly figures on Oct 30, has an Earnings ESP of +3.30% and carries a Zacks Rank of 3, at present.

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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