Welltower's (HCN) Q3 FFO, Revenues Top; Revises Guidance

Welltower Inc. (NYSE:HCN) , a healthcare real estate investment trust (“REIT”), came up with normalized funds from operations (“FFO”) per share of $1.16 for third-quarter 2016, beating the Zacks Consensus Estimate by a penny. The figure also improved from $1.12 reported in the year-ago quarter.

Results were positively impacted by robust average same store net operating income (“NOI”) growth in the trailing four quarters and investments activities.

The company posted revenues of around $1.08 billion, which beat the Zacks Consensus Estimate of $1.05 billion. Further, it compared favorably with the year-ago number of $979 million.

Quarter in Detail

Same store NOI grew 2.6% year over year. Moreover, same store seniors housing operating occupancy increased 70 basis points to 90.6% with revenues per occupied room growth of 4.0%.

Welltower completed gross investments of $1.4 billion (pro rata basis) in the quarter. This comprised $1.2 billion in acquisitions/joint ventures, $110 million in development funding and $119 million in loans. These investments were completed with existing relationships.

Welltower exited the quarter with cash and cash equivalents of $428.6 million, up from $217.9 million in at the end of 2015. Moreover, as of Sep 30, 2016, the company had $1.7 billion of available borrowing capacity under its primary unsecured credit facility. Further, the company generated around $358 million through its ATM and DRIP programs.

2016 Outlook

For 2016, Welltower revised its normalized FFO per share in a range of $4.50–$4.56 from the previous range of $4.50–$4.60.However, the company raised its 2016 same store cash NOI growth guidance to 3.0–3.25% from the previous guidance of 2.75–3.25%. The Zacks Consensus Estimate for 2016 currently stands at $4.57.

Further, in sync with its strategic repositioning of its premier health care portfolio, the company raised its 2016 disposition guidance from $1.3 billion to $4.1 billion of proceeds.

Our Take

Welltower’s results, supported by a notable operating portfolio performance, encourage us. In addition, a rise in senior citizen expenditure for healthcare promises strong prospects for the company. However, an anticipated rise in interest rate and intense competition remain matters of concern.

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

Some REITs which are slated to report results later this week include EPR Properties (NYSE:EPR) , Lamar Advertising Co. (NASDAQ:LAMR) and Federal Realty Investment Trust (NYSE:FRT) .

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.

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