Why Is Ventas (VTR) Up 12.8% Since Last Earnings Report?

It has been about a month since the last earnings report for Ventas (NYSE:VTR). Shares have added about 12.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ventas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Ventas Q2 FFO Beats Estimates, Revenues & NOI Declines

Ventas reported second-quarter 2020 normalized FFO per share of 77 cents, beating the Zacks Consensus Estimate of 73 cents. However, the figure was 21% lower than the year-ago quarter’s 97 cents.

The company generated revenues of $943.2 million in the second quarter, which lagged the Zacks Consensus Estimate of $974.8 million. The top line also compared unfavorably with the year-ago number of $950.7 million.

Results reflect a decline in same-store cash NOI. Moreover, the company’s SHOP assets were severely impacted by the coronavirus pandemic.

Quarter in Detail

For the second quarter, same-store cash NOI growth for the total property portfolio (1,074 assets) declined 13.6% year over year primarily due to the impacts of the pandemic. Portfolio wise, though same-store cash NOI for the NNN leased portfolio grew 1.4% and the office portfolio rose 2.7%, the SHOP portfolio reported a plunge of 42.7% year over year.

Balance Sheet Position

Ventas exited second-quarter 2020 with cash and cash equivalents of $992.8 million, up from the $106.4 million recorded as of 2019 end. Further, as of Jun 30, 2020, its annualized adjusted net debt to EBITDA ratio was 6.3.

To strengthen its balance sheet position amid the virus outbreak, the company raised $0.5 billion in March 2020 through a senior notes offering. In June and July, proceeds from the offering were used to repay primarily all of Ventas’ borrowing under its $3-billion revolving credit facility.

As a result of the efforts, the company had $3.5 billion of liquidity, consisting of $0.6 billion of cash and cash equivalents, $2.9 billion of available capacity on hand, and no commercial paper outstanding as of Aug 5.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Ventas has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ventas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.