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Factors Setting the Tone for Ventas (VTR) Q4 Earnings

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Ventas, Inc. (VTR - Free Report) is scheduled to report fourth-quarter and full-year 2019 results on Feb 20, before the market opens. While the company’s revenues are expected to reflect year-over-year growth, its funds from operations (FFO) per share might display a decline.

In the last reported quarter, this Chicago, IL-based healthcare real estate investment trust (REIT) delivered a positive surprise of 2.13%. The company witnessed higher rental income from its office and triple-net leased portfolio.

Over the preceding four quarters, Ventas outpaced the Zacks Consensus Estimate on all occasions, the average beat being 1.84%. The graph below depicts this surprise history:

Ventas, Inc. Price and EPS Surprise

Ventas, Inc. Price and EPS Surprise

Ventas, Inc. price-eps-surprise | Ventas, Inc. Quote

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

Factors at Play

Data from the National Investment Center for Seniors Housing & Care (NIC) indicates rise in senior housing occupancy in the fourth quarter. While there were broad differences in regional markets, assisted living occupancy level was the strongest in two years. In fact, seniors housing occupancy rate in the United States registered a sequential expansion of 0.1% to 88% during the quarter. Nonetheless, the senior housing’s annual rent growth remained unchanged sequentially at 2.8%.

As for Ventas, amid favorable demographics and growing outpatient trends, the company is focusing to capture the upside with its office segment, which includes MOBs, academic medical and research and innovation (R&I) businesses. Particularly, increasing longevity of the aging U.S. population, along with biopharma drug development growth opportunities, has boosted the institutional life-science and medical-market fundamentals. This is expected to have benefited Ventas’ office operations. Further, with a well-diversified portfolio with rent-paying ability from significant tenants, the company’s triple-net operation is likely to have been healthy.

The Zacks Consensus Estimate for fourth-quarter rental income from its office segment is pegged at $216 million, suggesting14.3% year-over-year growth.

Moreover, the Zacks Consensus Estimate for quarterly revenues is currently pinned at $979.6 million, suggesting a 6.1% increase from the prior-year period.

However, performance of the company’s seniors housing operating portfolio (SHOP) is likely to have been challenging amid choppy market conditions, a dynamic and competitive market, and lower occupancy levels. Particularly, high supply is expected to have intensified competition for new residents.

Prior to the fourth-quarter earnings release, there is lack of any solid catalyst for becoming overtly optimistic about the company’s business activities and prospects. As such, the Zacks Consensus Estimate of FFO per share remained unchanged at 92 cents, over the past 30 days, calling for a year-over-year decline of 4.2%.

For full-year 2019, Ventas expects normalized FFO per share of $3.81-$3.85. The Zacks Consensus Estimate for the same is currently pinned at $3.84, indicating a 5.6% year-over-year decline on revenues of $3.83 billion.

Here is What Our Quantitative Model Predicts

Our proven model predicts a beat in terms of FFO per share for Ventas this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of a beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Ventas currently carries a Zacks Rank of 3 and has an Earnings ESP of +0.81%.

Other Stocks That Warrant a Look

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

VICI Properties Inc. VICI set to release quarterly numbers on Feb 20, has an Earnings ESP of +2.70% and carries a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jernigan Capital, Inc. JCAP, scheduled to release earnings on Feb 26, has an Earnings ESP of +4.35% and currently carries a Zacks Rank of 3.

Urstadt Biddle Properties Inc. UBA, expected to release quarterly numbers around Mar 13, has an Earnings ESP of +1.41% and carries a Zacks Rank of 3, currently.

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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