It has been about a month since the last earnings report for HCP, Inc.HCP . Shares have added about 2.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
HCP Q1 FFO Beats Estimates, Deleveraging on Track
HCP reported first-quarter 2017 FFO as adjusted of $0.51 per share, beating the Zacks Consensus Estimate of $0.48.
Results were driven by growth in three-month same-property portfolio cash NOI. The figure also compared favorably with the year-ago quarter FFO as adjusted (excluding Quality Care Properties, Inc. contribution) of $0.48 per share.
The company also remains on track with its deleveraging plan and aims for net debt to EBITDA in the low-to-mid six-times range and a financial leverage in the 43-44% band by the end of 2017.
However, the company posted revenues of $492.2 million, which missed the Zacks Consensus Estimate of $522.6 million. The figure is also lower than the year-ago quarter's tally of $520.5 million.
Importantly, during the quarter, HCP completed the previously announced sale of 64 triple-net assets leased to Brookdale Senior Living, Inc. at $1.125 billion. The company used the proceeds for debt repayment and meeting general corporate needs.
Behind the Headlines
HCP attained year-over-year three-month cash SPP NOI growth of 4.0%. Results were backed by solid senior housing triple-net and life science portfolio performances.
During the quarter, the company signed a 10-year lease during the quarter with biotechnology company - Global Blood Therapeutics, Inc. - for 67,000 square feet at Phase I of The Cove. This lease, expected to start in Dec 2017, makes Phases I and II of The Cove fully leased.
Moreover, in addition to the sale of a portfolio of 64 triple-net assets leased to Brookdale, the company completed the previously announced sale of a 40% stake in its RIDEA II senior housing joint venture and the associated financing of the venture. This helped the company generate $480 million of proceeds which were used for paying down its revolving credit facility. Also, during the reported quarter, HCP completed $121 million of additional dispositions.
HCP exited first-quarter 2017 with cash and cash equivalents of $764.1 million, up from $94.7 million at the end of 2016. It ended the quarter with $2.3 billion of liquidity from a combination of cash and availability under its $2.0 billion credit facility. During the first quarter, the company repaid $1.1 billion of debt using proceeds reaped from the Brookdale transactions and other dispositions.
HCP reaffirmed full-year 2017 FFO as adjusted and SPP Cash NOI guidance ranges. The company expects full-year 2017 FFO as adjusted per share in the $1.89-$1.95 band. The company projects 2017 SPP cash NOI growth in the range of 2.5-3.5%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
HCP, Inc. Price and Consensus
At this time, HCP's stock has a poor Growth Score of 'F'. However, its Momentum is doing a lot better with a 'B'. The stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum investors based on our style scores.
While estimates have been broadly trending downward for the stock, the magnitude of this revision is net zero. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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