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Is it Wise to Hold Ventas (VTR) Stock in Your Portfolio Now?


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Shares of Ventas Inc. VTR have gained 4.5% in the past three months against the industry decline of 2.5% in the past three months. Moreover, the trend in current-year funds from operations (FFO) per share estimate revisions indicates a favorable outlook for the company. In fact, the stock has seen the Zacks Consensus Estimate for current-year FFO per share being revised marginally upward in a month.




The company's third-quarter 2018 normalized FFO per share of 99 cents and revenues of $936.5 million surpassed the respective Zacks Consensus Estimate. Results were supported by higher rental income from its office portfolio and same-store cash net operating income (NOI) growth in its triple net leased portfolio.

With impressive portfolio strength backed by seniors housing operating assets located in elite markets, the company is well poised to benefit from favorable demographic trends. Its assets in high-barrier-to entry coastal market account for a significant portion of the company's NOI. Notably, the senior citizens population is expected to increase in the upcoming years. Hence, as senior citizens tend to spend more on healthcare services, Ventas has the potential to capitalize on this trend.

Additionally, the company is also making decent investments in its medical office and life science real estate portfolio. This enables Ventas to achieve portfolio diversity and offers an opportunity to capitalize on the growing healthcare-driven R&D, supported by top-tier research universities.

A strong balance sheet and ample liquidity allows the company to execute such strategic pursuits.  

However, increasing availability of seniors' housing space due to higher supply in certain markets remains a concern for Ventas. This will likely curtail the landlords' pricing power and limit near-term growth in occupancy level.

Further, the company remains focused on monetizing assets and use proceeds to retire debt and invest in growth opportunities. Although such efforts enable Ventas to optimize its portfolio and efficiently manage financial obligations, near-term dilution in earnings cannot be bypassed. In fact, Ventas' third-quarter 2018 results were impacted by the $1.3-billion dispositions and loan-repayment proceeds received by the company in first-half 2018.

Lastly, rising interest rates continue to impact its performance. While higher rates increase the cost of financing acquisitions and development activity, it lowers the amount third parties are ready to pay for the company's assets at disposal.

Ventas carries a Zacks Rank #3 (Hold), currently.

Stocks to Consider

A few better-ranked stocks from the REIT industry are Alexandria Real Estate Equities, Inc. ARE , PS Business Parks, Inc. PSB and Cousins Properties Incorporated CUZ . All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Alexandria Real Estate Equities' FFO per share estimates for 2018 have been revised marginally upward to $6.61 in 60 days' time.

PS Business Parks' Zacks Consensus Estimate for 2018 FFO per share has inched up 1.3% to $6.45 in the past 30 days.

Cousins Properties' Zacks Consensus Estimate for the current-year FFO per share have been revised marginally upward to 62 cents in 30 days' time.

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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Ventas, Inc. (VTR): Free Stock Analysis Report

Cousins Properties Incorporated (CUZ): Free Stock Analysis Report

Alexandria Real Estate Equities, Inc. (ARE): Free Stock Analysis Report

PS Business Parks, Inc. (PSB): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: VTR , CUZ , ARE , PSB



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