Ventas' (VTR) Q2 FFO In Line, Revenues Beat Estimates

Ventas, Inc.’s (NYSE:VTR) second-quarter 2016, normalized funds from operations (“FFO”) of $1.04 per share came in-line with the Zacks Consensus Estimate.

The company posted revenues of $848.4 million in the second quarter, which beat the Zacks Consensus Estimate of $837 million. Further, it compared favorably with the year-ago tally of $811.9 million.

Modest NOI Growth

For second-quarter 2016, same-store cash net operating income (“NOI”) growth for total portfolio (1,186 assets) was 3.5% on a reported basis. Notably, triple net same-store cash NOI grew 6.2%; the seniors housing operating portfolio same-store NOI grew 2.1% and the medical office building portfolio rose 0.8%.

Notable Portfolio Activity

During second-quarter 2016, the company made $65 investments. This included development and redevelopment projects worth $35 million and asset acquisitions worth $30 million. Also, during the reported quarter, Ventas issued and sold 3.5 million common shares for $232 million under its ‘at the market’ (“ATM”) equity offering program.

Liquidity

Presently, the company has around $1.8 billion available under its revolving credit facility and $669 million of cash or cash equivalent in hand.

2016 Outlook

Ventas revised its 2016 normalized FFO per share outlook in the range of $4.05– $4.13, denoting an expected growth of 3–5% from 2015 on a comparable basis. However, this marks a downward revision from the earlier range of $4.07–$4.15, due to the dilutive impact of pre-funding part of the Wexford acquisition with equity and additional deleveraging.

Like earlier predication, the company anticipates same-store cash net operating income growth of 2–3% in 2016, from the previous guidance of 1.5–3%. Further, Ventas estimates 2016 dispositions of $500 million and intends to use the net proceeds for reinvestment into acquisition and debt repayment.

Our Take

Going forward, we believe that Ventas’ adequate size and scale would help it capitalize on opportunities such as increasing healthcare spending, aging population and a rise in insured individuals. Yet, stiff competition and a projected rise in interest rates keep us concerned.

Ventas currently has a Zacks Rank #2 (Buy).

We now look forward to the earnings releases of General Growth Properties, Inc (NYSE:GGP) , Welltower Inc. (NYSE:HCN) and Vornado Realty Trust (NYSE:VNO) which are scheduled next week.

Note: All EPS numbers presented in this write-up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.