Ventas (VTR) Down 65.4% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Ventas (VTR). Shares have lost about 65.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ventas due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Ventas Q4 FFO Beats Estimates, Revenues Improve Y/Y

Ventas reported fourth-quarter 2019 normalized FFO per share of 93 cents, beating the Zacks Consensus Estimate of 92 cents. However, the figure came in lower than the year-ago tally of 96 cents.

Results reflect solid performance of its Medical Office, Healthcare and R&I portfolios, though the Senior Housing business faced a choppy market environment.

The company generated revenues of around $996 million in the fourth quarter, which surpassed the Zacks Consensus Estimate of $979.5 million. The top line also compares favorably with the year-ago number of $923.3 million.

For full-year 2019, the company reported normalized FFO per share of $3.85, down 5.4% from the prior year’s $4.07. Revenues for the full year also climbed 3.4% year on year to $3.87 billion.

Quarter in Detail

For the fourth quarter, same-store cash NOI growth for the total property portfolio (1,102 assets) edged down 0.6% year over year. Segment wise, though same-store cash NOI for the triple-net leased portfolio grew 2.1% and the office portfolio rose 3.8%, the senior housing operating properties (SHOP) portfolio reported a decline of 7.5%, year on year.

Notably, the same-store SHOP NOI performance in the fourth quarter reflects the cumulative impact of new competition that affected SHOP occupancy and rate. Nevertheless, same-store growth of the triple-net leased portfolio was driven by in-place lease escalations, specifically in its growing triple-net leased healthcare portfolio of acute and post-acute assets. Moreover, solid growth of the office portfolio was fueled by Ventas’ university-based R&I portfolio and healthy growth in its Medical Office Building (MOB) portfolio.

Liquidity

Ventas exited fourth-quarter 2019 with cash and cash equivalents of $106.4 million, up from the $148.1 million recorded as of the prior-quarter end. In addition, the company’s available liquidity from cash on hand and existing credit facilities aggregated $2.6 billion, net of $567 million of outstanding commercial paper at the end of 2019.

Outlook

Ventas expects its 2020 normalized FFO per share of $3.56-$3.69. The 2020 Nareit FFO per share is projected at $3.79-$3.94.

The full-year projection of the company is backed by same-store cash NOI growth assumption of a 1.5-2.5% year-over-year increase for the tripple-net leased portfolio and a 3-4% jump for the office portfolio. However, the company expects a 4-9% decline for the SHOP portfolio, reflecting lower occupancy start point in January 2020 as well as the impact of cumulative supply.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Ventas has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ventas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.