Ventas (VTR) Stock Rises 11.4% in Three Months: Here's How

Shares of Ventas VTR have gained 11.4% in the past three months against the industry’s decline of 6.5%.

This Chicago-based healthcare real estate investment trust (REIT) is well-positioned to gain from its diverse portfolio of healthcare real estate assets in the key markets of the United States and the U.K. An aging population and the rise in healthcare expenditure by senior citizens are likely to benefit the senior housing operating portfolio (SHOP).

The outpatient medical portfolio is expected to gain from favorable outpatient visit trends. Ventas’ accretive investments to expand its research portfolio are encouraging.

The company, carrying a Zacks Rank #3 (Hold) at present, expects normalized FFO per share in the range of $3.10-$3.18. The Zacks Consensus Estimate for VTR’s current-year FFO per share is pegged at $3.16, which lies within expectations.

 

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Let’s find out the factors behind the surge in the stock price.

The senior citizen population is expected to rise in the years ahead. As a result, the national healthcare expenditure by senior citizens, who constitute a major customer base for healthcare services and incur higher healthcare expenditures than the average population, is likely to increase in the upcoming period.

With an expectation of a rising senior citizens population in the years ahead and muted new supply in its markets, VTR is well-prepared for a compelling multiyear growth opportunity. We estimate a year-over-year increase of 6.6% in total revenues in 2024.

The U.S. senior housing multiyear growth opportunity is driven by record demand and decelerating new supply. The company expects favorable supply-demand fundamentals, its well-invested properties and operators supported by its Ventas OI platform to drive growth. Our estimate indicates a year-over-year rise of 18.3% in the SHOP segment's NOI in 2024.

Amid favorable demographics and growing outpatient trends, Ventas is committed to capitalizing on this upside within its outpatient medical and research portfolio, which includes outpatient medical buildings and research centers.

The same-store NOI growth for this segment was more than 3% in 2022 and 2023. While we estimate a 1.3% year-over-year increase in 2024, the company’s outpatient medical and research segment’s NOI is expected to grow 4.7% in 2025.

Ventas is carrying out accretive investments to enhance its research portfolio, which is essential for the delivery of crucial healthcare services and research related to life-saving vaccines and therapeutics. Ventas owns research centers in life science clusters, with a presence in some of the top-tier research university campuses.

With top-rated tenants and long-lease terms, its high-quality portfolio assures steady growth in cash flows. Our estimate for the company’s outpatient medical and research segment’s total revenues indicates year-over-year growth of 2.6% and 4.4% in 2024 and 2025, respectively.

Ventas maintains a healthy balance sheet position. It has been making efforts to enhance its liquidity position and financial strength. As of Mar 31, 2024, the company had approximately $3.4 billion of liquidity. It has a manageable near-term debt maturity profile, with $1.2 billion maturing in 2024. It also enjoys favorable credit ratings from S&P Global Ratings and Moody’s, providing access to the debt market. The company’s decent financial flexibility is likely to support its growth endeavors.

However, competition from national and local operators limits its power to raise rents and drive profitability. A high interest rate environment add to its woes.

Stocks to Consider

Some better-ranked stocks from the REIT sector are Americold Realty Trust COLD and Cousins Properties CUZ carrying a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The consensus estimate for COLD’s current-year FFO per share has moved 4.4% northward over the past month to $1.42.

The Zacks Consensus Estimate for CUZ’s 2024 FFO per share has been raised marginally northward over the past month to $2.63.

Note: Anything related to earnings presented in this write-up represents 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.

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