Shares of Welltower WELL have gained 14.5% in the past three months, outperforming the industry’s decline of 0.5%.
Welltower owns a well-diversified portfolio of healthcare real estate assets in the key markets of the United States, Canada and the U.K. Given an aging population and an expected rise in senior citizens’ healthcare expenditure, the company’s senior housing operating (SHO) segment is well-poised to benefit from this positive trend. The outpatient medical (OM) portfolio is expected to benefit from favorable outpatient visit trends in the near term.
Analysts seem positive on this healthcare REIT, currently carrying a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its 2025 funds from operations (FFO) per share has been revised 2.1% northward to $4.89 over the past month.
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Let us decipher the possible factors behind the surge in the stock price.
The senior citizens’ 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 of healthcare services and incur higher healthcare expenditures than the average population, is likely to increase in the upcoming period. Muted new supply has also been a tailwind for this industry. Capitalizing on these positive aspects, WELL’s SHO portfolio is well-prepared for compelling multiyear revenue growth. In 2025, management anticipates the same-store SHO net operating income to grow within 15-21%.
Historically, there has been a favorable outpatient visit trend compared with in-patient admissions. Banking on this, the company is optimizing its OM portfolio, growing relationships with health system partners and deploying capital in strategic acquisitions. Given the favorable secular trends and growing need for value-based care, the company’s efforts to strengthen its OM footprint will boost long-term growth.
Welltower focuses on strategic portfolio optimization and synergistic collaborations with health systems to invest in the next-generation assets of health and wellness care delivery. The company has resorted to capital-recycling activities to finance near-term investment and development opportunities, paving the way for its long-term growth.
Welltower has also been actively banking on its growth opportunities through acquisitions. This month, Welltower announced that it is under contract to acquire Amica Senior Lifestyles portfolio from the Ontario Teachers' Pension Plan for C$4.6 billion. The deal, subject to customary regulatory approvals, is expected to close in the fourth quarter of 2025.
Welltower has a healthy balance sheet position and ample liquidity to meet near-term obligations and fund its development pipeline. As of Dec. 31, 2024, it had $8.7 billion of available liquidity, including $3.7 billion of cash & restricted cash and full capacity under its $5 billion line of credit. As of Dec. 31, 2024, the net debt to adjusted EBITDA was 3.49X, improving from 5.03X year over year. Moreover, Welltower’s debt maturities are well-laddered, with a weighted average maturity of 5.9 years, thereby enhancing its financial flexibility.
With the above-mentioned factors, we believe the rising trend in the stock is expected to continue in the near term.
Key Risks for WELL
A competitive landscape in the senior housing market and tenant concentration in its triple-net portfolio are likely to weigh on Welltower.
Other Stocks to Consider
Some other top-ranked stocks from the broader REIT sector are Cousins Properties CUZ and Sabra Healthcare REIT SBRA, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
The Zacks Consensus Estimate for Cousins Properties’ 2025 FFO per share is pinned at $2.76, which suggests year-over-year growth of 2.6%.
The Zacks Consensus Estimate for Sabra’s 2025 FFO per share stands at $1.49, which indicates an increase of 3.5% from the year-ago period.
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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Welltower Inc. (WELL) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
