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HCP Q2 FFO Beats Estimates, Revenues Up Y/Y, '18 View Up

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HCP Inc. HCP reported second-quarter 2018 funds from operations (FFO) as adjusted of 47 cents per share, beating the Zacks Consensus Estimate of 46 cents. Comparable FFO as adjusted in the prior-year quarter was 48 cents per share.

Results reflect better-than-expected revenue numbers for the reported quarter.

This healthcare real estate investment trust (REIT) generated revenues of $ 469.5 million, surpassing the Zacks Consensus Estimate of $467.2 million. Moreover, the figure compares favorably with the year-ago number of $458.9 million.

Behind the Headlines

HCP experienced 0.7% year-over-year rise in the three-month cash SPP net operating income (NOI). Though there was growth of 0.5% in life-science cash NOI, 0.7% increase in senior-housing triple-net and 2.5% rise in the Medical office portfolio, the positives were offset by 4.4% decrease in senior-housing operating portfolio (SHOP) cash NOI.

During the quarter under review, HCP completed the sale of five assets, totaling $243 million to Brookdale Senior Living.

To date, the management of 20 senior-housing communities, owned by HCP, were being transitioned from Brookdale to Atria Senior Living. The remaining will likely be transitioned in the ongoing quarter.

Also, two senior-housing communities were transitioned to Eclipse, five to Sunrise and another to Sonata.

HCP had cash and cash equivalents of around $91.4 million as of Jun 30, 2018, up from $55.3 million recorded at the end of 2017. Further, the company ended the reported quarter with $1.5 billion of liquidity from a combination of cash and availability under its $2-billion credit facility. It has no major senior notes or secured debt maturities until 2019.

Outlook

HCP revised its 2018 FFO as adjusted guidance and expects it in the range of $1.79-$1.83 per share as compared with the previous band of $1.77-$1.83 per share. The Zacks Consensus Estimate is pegged at $1.81.

Furthermore, the company reaffirmed the 2018 SPP cash NOI growth guidance of 0.25-1.75%.

Conclusion

Strategic divestitures, efforts to lower the Brookdale portfolio concentration and a focus on deleveraging augur well for HCP's long-term growth.

Nonetheless, cash NOI for the company's SHOP portfolio witnessed a year-over-year decline. Notably, softness in the seniors housing fundamentals is likely to continue in the upcoming quarters amid rise in new supply in the market. This is anticipated to affect the company's pricing power and occupancy level.

In addition, the cut-throat competitive market makes it more challenging for the company to boost its revenues, as well as identify and successfully capitalize on acquisition opportunities that meet its objectives.

HCP, Inc. Price, Consensus and EPS Surprise

HCP, Inc. Price, Consensus and EPS Surprise | HCP, Inc. Quote

HCP currently has a Zacks Rank #4 (Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Duke Realty Corporation's DRE Q2 core FFO per share of 33 cents came in line with the Zacks Consensus Estimate. Moreover, the figure came in a cent higher than the year-ago tally.

Iron Mountain Inc. IRM reported second-quarter 2018 normalized FFO of 56 cents per share, beating the Zacks Consensus Estimate of 53 cents. The reported figure inched up 1.8% year over year.

Digital Realty Trust, Inc.'s DLR June-end quarter's core FFO per share of $1.66 outpaced the Zacks Consensus Estimate of $1.61. The figure also came in higher than the year-ago quarter tally of $1.54.

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


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

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