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Ventas' (VTR) Q1 FFO Beats Estimates, Revenues Rise

Ventas, Inc.’s VTR first-quarter 2016, normalized funds from operations (“FFO”) of $1.04 per share surpassed the Zacks Consensus Estimate of $1.02. On a comparable basis, adjusting the effect of spin-offs, normalized FFO for the quarter grew 7% year over year.

The company posted revenues of $852.3 million in the first quarter, which beat the Zacks Consensus Estimate of $814 million. Further, it compared favorably with the year-ago tally of $805.6 million.

Behind the Headlines

For first-quarter 2016, same-store cash NOI growth for total portfolio (1,069) assets was 2.9%, excluding certain items and 1.7% on a reported basis. Notably, triple net same-store cash NOI declined 0.3%; the seniors housing operating portfolio (“SHOP”) same-store NOI grew 2.9% and the medical office building (“MOB”) portfolio rose 4.2%.

Notable Portfolio Activity

During first-quarter 2016, the company made $154 investments. This included secured debt investment of $140 million in class-A life science properties situated in Cambridge, MA, San Francisco, CA and San Diego, CA. Also, during the quarter, the company financed $37 million from its pipeline of $500 million for top-quality development and redevelopment projects.


Presently, the company has around $1.8 billion available under its revolving credit facility and $53 million of cash or cash equivalent in hand.

2016 Outlook

Ventas reaffirms its 2016 normalized FFO per share outlook in the range of $4.07–$4.15, denoting expected growth of 3–5% from 2015 on a comparable basis. The company anticipates same-store cash net operating income growth of 1.5–3% in 2016. Further, for 2016 Ventas estimates dispositions of $500 million and intends to use the net proceeds for reinvestment into acquisitions and debt repayment.

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. Yet, stiff competition and a projected rise in interest rates keep us concerned.

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

We now look forward to other REITs that are scheduled to release first-quarter 2016 results next week. These include General Growth Properties, Inc GGP, Taubman Centers, Inc. TCO and Vornado Realty Trust VNO.

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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