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Ventas (VTR) Beats Q3 FFO Estimates, Lags on Revenues

Backed by strong growth in net operating income, Ventas, Inc. 's VTR third-quarter 2015 normalized funds from operations ("FFO") of $1.09 per share surpassed the Zacks Consensus Estimate of $1.06. On a comparable basis, adjusting the effect of spin-offs, normalized FFO for the quarter was 98 cents per share, up 7% year over year.

Total revenue during the quarter was $827.6 million, surging 17.4% year over year. However, the figure lagged the Zacks Consensus Estimate of $902 million.

Quarter in Detail

For the company's total portfolio, same-store cash net operating income ("NOI") grew 4.3% (in constant currency) year over year. Same-store seniors housing operating portfolio NOI climbed 3.2% (in constant currency).

During third-quarter 2015, Ventas closed the acquisition of Ardent Health Services and sold its hospital operating business. The REIT also spun off majority of its skilled nursing facility portfolio into Care Capital Properties. Along with this, the company spent $28 million in development and redevelopment activities.

Liquidity

Ventas currently has around $2 billion available under its revolving credit facility and $65 million of cash in hand.

2015 Outlook Raised

Ventas increased its 2015 normalized FFO per share outlook range to $4.43-$4.46 from the prior projection of $4.39-$4.45, marking 7-8% year-over-year growth. Same-store cash NOI growth projections were raised to 3.5-4% for 2015 from the earlier outlook of 2.5-3.5%.

Our Take

Ventas' better-than-expected performance is encouraging. Going forward, we believe the company's adequate size and scale would help it capitalize on opportunities such as increasing healthcare spending, aging population and a rise in insured individuals. The Ardent deal and the spin-off of the skilled nursing facility will further serve to boost the company's operating platform, thereby helping it increase shareholders' value.

Ventas currently has a Zacks Rank #5 (Strong Sell). We presently await the results of other healthcare REITs like HCP, Inc. HCP , Welltower Inc. HCN and Healthcare Realty Trust Inc. HR , all of which are scheduled to report in the upcoming days.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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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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