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What's in Store for Welltower (WELL) This Earnings Season?
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Welltower, Inc. (WELL - Free Report) is slated to report second-quarter 2023 earnings on Jul 31, after market close. While the quarterly results are likely to reflect year-over-year revenue growth, funds from operations (FFO) per share are expected to have been on par with the prior-year quarter’s reported figure.
In the last reported quarter, this Toledo, OH-based healthcare real estate investment trust (REIT) witnessed normalized FFO per share of 85 cents, beating the Zacks Consensus Estimate by 3.66%. The results reflected better-than-anticipated revenues. The total same-store net operating income (SSNOI) increased year over year, driven by SSNOI growth in the seniors housing operating (SHO) portfolio.
Over the preceding four quarters, Welltower’s FFO per share beat the Zacks Consensus Estimate on three occasions and met once, the average beat being 1.52%. The graph below depicts this surprise history:
During the second quarter, Welltower’s SHO portfolio is likely to have continued witnessing healthy move-in activity, given the robust demand for this need-based asset category. Also, a significant decline in construction starts and slower net inventory growth are expected to have boosted occupancy levels for this portfolio.
Going by the company’s June Business Update, sustained rate growth and an improvement in occupancy levels continue to fuel revenue growth, while improvements in full-time employee hiring trends and lower agency usage have reduced compensation expense growth.
These better-than-anticipated revenue and expense trends are expected to have aided the SHO portfolio’s NOI growth during the second quarter. We estimate SSNOI for this segment to increase 19% year over year in the quarter.
Further, Welltower’s long-term leases with its healthcare management companies or operators are expected to have helped generate stable rental revenues, boosting its top line.
The Zacks Consensus Estimate for second-quarter resident fees and services is pegged at $1.15 billion, indicating an increase of 1.9% from the previous quarter’s reported number of $1.13 billion and 14.2% from the year-ago quarter’s $1.01 billion. We estimate resident fees and services to grow 11.3% year over year in the quarter.
The consensus mark for quarterly rental income stands at $386.5 million, implying a 6.9% rise from the prior-year quarter’s $361.4 million. Our estimate implies a 6.8% increase year over year for rental income.
Total revenues for the quarter are pegged at $1.59 billion, suggesting a rise of 7.9% from the prior-year period’s reported number.
We expect WELL to have continued with its near-term investment and development activities during the quarter, supported by its robust balance sheet position and capital-recycling efforts.
Nonetheless, higher interest expenses and exposure to adverse foreign currency movements might have cast a pall on the company’s quarterly performance to some extent. Our estimate for second-quarter 2023 interest expense indicates a year-over-year increase of 22.8%.
The company’s activities during the quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for second-quarter FFO per share has been revised 1.1% downward to 86 cents over the past two months.
Q2 Developments
Underpinning the continued strength in its SHO portfolio in the wake of the pandemic and recent capital activity, Welltower raised its earnings guidance for 2023. It now expects 2023 normalized FFO per share in the range of $3.43 -$3.56, revised upward from $3.39-$3.54 stated earlier. This implies an increase of 3 cents per share at the midpoint to $3.495.
The net income attributable to common stockholders per share for the current year is now anticipated to be in the range of 61-74 cents, up from 57-72 cents guided earlier.
In addition, per the company’s June Business Update, in May 2023, it issued five-year $1.035 billion convertible senior unsecured notes carrying a coupon of 2.75% and a conversion premium of 25% (representing a conversion share price of $95.41). It plans to deploy the proceeds to address its upcoming unsecured debt maturities and fund accretive external growth opportunities.
Earning Whispers
Our proven model does not conclusively predict a surprise in terms of FFO per share for Welltower this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.
Earnings ESP: Welltower has an Earnings ESP of -0.67%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here are some stocks from the REIT sector, which according to our model, have the right combination of elements to deliver a surprise this reporting cycle:
Hudson Pacific Properties (HPP - Free Report) is slated to report quarterly numbers on Aug 1. HPP has an Earnings ESP of +2.22% and carries a Zacks Rank #3 presently.
Ventas (VTR - Free Report) is scheduled to report quarterly numbers on Aug 3. VTR has an Earnings ESP of +1.75% and a Zacks Rank #2 currently.
Ryman Hospitality Properties (RHP - Free Report) is slated to report quarterly numbers on Aug 3. RHP has an Earnings ESP of +3.87% and carries a Zacks Rank #1 presently.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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What's in Store for Welltower (WELL) This Earnings Season?
Welltower, Inc. (WELL - Free Report) is slated to report second-quarter 2023 earnings on Jul 31, after market close. While the quarterly results are likely to reflect year-over-year revenue growth, funds from operations (FFO) per share are expected to have been on par with the prior-year quarter’s reported figure.
In the last reported quarter, this Toledo, OH-based healthcare real estate investment trust (REIT) witnessed normalized FFO per share of 85 cents, beating the Zacks Consensus Estimate by 3.66%. The results reflected better-than-anticipated revenues. The total same-store net operating income (SSNOI) increased year over year, driven by SSNOI growth in the seniors housing operating (SHO) portfolio.
Over the preceding four quarters, Welltower’s FFO per share beat the Zacks Consensus Estimate on three occasions and met once, the average beat being 1.52%. The graph below depicts this surprise history:
Welltower Inc. Price and EPS Surprise
Welltower Inc. price-eps-surprise | Welltower Inc. Quote
Factors at Play
During the second quarter, Welltower’s SHO portfolio is likely to have continued witnessing healthy move-in activity, given the robust demand for this need-based asset category. Also, a significant decline in construction starts and slower net inventory growth are expected to have boosted occupancy levels for this portfolio.
Going by the company’s June Business Update, sustained rate growth and an improvement in occupancy levels continue to fuel revenue growth, while improvements in full-time employee hiring trends and lower agency usage have reduced compensation expense growth.
These better-than-anticipated revenue and expense trends are expected to have aided the SHO portfolio’s NOI growth during the second quarter. We estimate SSNOI for this segment to increase 19% year over year in the quarter.
Further, Welltower’s long-term leases with its healthcare management companies or operators are expected to have helped generate stable rental revenues, boosting its top line.
The Zacks Consensus Estimate for second-quarter resident fees and services is pegged at $1.15 billion, indicating an increase of 1.9% from the previous quarter’s reported number of $1.13 billion and 14.2% from the year-ago quarter’s $1.01 billion. We estimate resident fees and services to grow 11.3% year over year in the quarter.
The consensus mark for quarterly rental income stands at $386.5 million, implying a 6.9% rise from the prior-year quarter’s $361.4 million. Our estimate implies a 6.8% increase year over year for rental income.
Total revenues for the quarter are pegged at $1.59 billion, suggesting a rise of 7.9% from the prior-year period’s reported number.
We expect WELL to have continued with its near-term investment and development activities during the quarter, supported by its robust balance sheet position and capital-recycling efforts.
Nonetheless, higher interest expenses and exposure to adverse foreign currency movements might have cast a pall on the company’s quarterly performance to some extent. Our estimate for second-quarter 2023 interest expense indicates a year-over-year increase of 22.8%.
The company’s activities during the quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for second-quarter FFO per share has been revised 1.1% downward to 86 cents over the past two months.
Q2 Developments
Underpinning the continued strength in its SHO portfolio in the wake of the pandemic and recent capital activity, Welltower raised its earnings guidance for 2023. It now expects 2023 normalized FFO per share in the range of $3.43 -$3.56, revised upward from $3.39-$3.54 stated earlier. This implies an increase of 3 cents per share at the midpoint to $3.495.
The net income attributable to common stockholders per share for the current year is now anticipated to be in the range of 61-74 cents, up from 57-72 cents guided earlier.
In addition, per the company’s June Business Update, in May 2023, it issued five-year $1.035 billion convertible senior unsecured notes carrying a coupon of 2.75% and a conversion premium of 25% (representing a conversion share price of $95.41). It plans to deploy the proceeds to address its upcoming unsecured debt maturities and fund accretive external growth opportunities.
Earning Whispers
Our proven model does not conclusively predict a surprise in terms of FFO per share for Welltower this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.
Earnings ESP: Welltower has an Earnings ESP of -0.67%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: WELL currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Warrant a Look
Here are some stocks from the REIT sector, which according to our model, have the right combination of elements to deliver a surprise this reporting cycle:
Hudson Pacific Properties (HPP - Free Report) is slated to report quarterly numbers on Aug 1. HPP has an Earnings ESP of +2.22% and carries a Zacks Rank #3 presently.
Ventas (VTR - Free Report) is scheduled to report quarterly numbers on Aug 3. VTR has an Earnings ESP of +1.75% and a Zacks Rank #2 currently.
Ryman Hospitality Properties (RHP - Free Report) is slated to report quarterly numbers on Aug 3. RHP has an Earnings ESP of +3.87% and carries a Zacks Rank #1 presently.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.