On Aug 28, 2013, we reiterated our long-term recommendation on
), a healthcare real estate investment trust (REIT) at Neutral.
This was based on the company's successful strategic investments
in recent quarters, rising healthcare expenditures, decent
balance sheet and enhanced full-year outlook. However,
lower-than-expected second-quarter results as well as rising
interest rates and capital market volatility remain plausible
HCP reported lower-than-expected second-quarter 2013 results,
with reported FFO per share of 72 cents missing the Zacks
Consensus Estimate by 2 cents. Results reflected
lower-than-expected growth in revenues and rise in expenses.
Though the lower-than-expected results are discouraging, we
believe that going forward, HCP is well poised to see a strong
growth trajectory given its well-balanced, diversified portfolio,
opportunistic acquisitions, aging population, rising healthcare
expenses, decent balance sheet, and improving credit metrics.
In second-quarter 2013, HCP completed $367 million of
investment transactions. Moreover, the company has raised its
outlook for the year on one-time benefits and strategic
Yet, the rising interest rates and capital market volatility
have adversely impacted the deal volumes in recent times. Also,
the company's dependence on a limited number of operators and
tenants for a large share of its revenues is a concern and
cut-throat competition remains a deterrent.
Over the last 30 days, the Zacks Consensus Estimate for 2013
remained stable at $2.98 per share. However, for 2014, it dropped
0.3% to $3.13 per share. The stock now carries a Zacks Rank #3
Other Stocks to Consider
REITs that are performing better and are worth a look include
Douglas Emmett Inc.
Highwoods Properties Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely accepted and reported measure of the
performance of REITs is derived by adding depreciation,
amortization and other non-cash expenses to net income.
CUBESMART (CUBE): Free Stock Analysis Report
DOUGLAS EMMETT (DEI): Free Stock Analysis
HCP INC (HCP): Free Stock Analysis Report
HIGHWOODS PPTYS (HIW): Free Stock Analysis
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