We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is it Wise to Retain Healthpeak (PEAK) Stock in Your Portfolio?
Read MoreHide Full Article
Healthpeak is well-poised to benefit from its diversified and top-quality portfolio across three core asset classes of lab, outpatient medical and continuing care retirement community (CCRC) real estate in the United States. Solid demand for lab assets and an expected rise in senior citizens’ healthcare spending position the company well to ride the growth curve. However, competition from industry players and a high interest rate environment add to its woes.
What’s Aiding It?
The increasing life expectancy of the U.S. population and biopharma drug development growth opportunities have promoted the lab real estate market fundamentals lately and led to a rise in demand for such assets. Also, the use of artificial intelligence and machine learning is likely to increase the probability of success in drug research and lower the timeline for development, indicating a rise in the allocation of healthcare spending by healthcare research institutes in the upcoming years.
From the beginning of 2023 through Oct 30, the lab portfolio witnessed year-over-year growth of 4.3% in the cash same-store portfolio net operating income (NOI). With very few lease maturities in the portfolio through year-end 2024, PEAK’s lab portfolio is well-positioned for growth. We expect a year-over-year increase of 4.1% in the segment’s cash same-store NOI in 2023.
With a likelihood of the senior citizen population rising in the years ahead, Healthpeak’s CCRC portfolio, which refers to its retirement communities that include independent living, assisted living and skilled nursing units, is positioned to benefit from the high healthcare expenditures incurred by this age cohort. Our estimate suggests a year-over-year increase of 15.1% in CCRC portfolio’s cash same-store NOI in 2023.
The company maintains a healthy balance sheet position and exited the third quarter of 2023 with around $3 billion of liquidity. It also enjoys long-term credit ratings of Baa1 (Stable) from Moody’s and BBB+ (Stable) from S&P Global as of Sep 30, 2023, rendering it easy access to the debt market at favorable costs. With a sound liquidity position, Healthpeak is well-placed to bank on growth opportunities.
Further, PEAK’s current cash flow growth is projected at 55.80% compared with 8.10% estimated for the industry.
What’s Hurting It?
Healthpeak operates in a competitive market and contends with several other companies providing similar healthcare services or alternatives such as home health agencies, life care at home, community-based service programs, retirement communities and convalescent centers. The company’s operators contend with peers for occupancy, which could limit the company’s power to raise rents and affect revenues and profitability.
PEAK’s development and redevelopment pipeline, although encouraging for long-term growth, exposes the company to the risks associated with rising construction costs in an inflationary environment. Also, global supply-chain disruptions and labor shortages, including procurement delays and long lead times on certain materials, are negatively impacting the scheduled completion and/or costs of these projects.
Given the current high interest rate environment, Healthpeak may find it difficult to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side. For 2023, we anticipate a year-over-year rise of 17% in the company’s interest expense.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have gained 16.2% compared with the industry's upside of 20%.
The Zacks Consensus Estimate for Stag’s 2023 funds from operations (FFO) per share is pegged at $2.28, suggesting year-over-year growth of 3.2%.
The Zacks Consensus Estimate for VICI Properties’ 2023 FFO per share stands at $2.15, indicating an increase of 11.4% from the year-ago reported figure.
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.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Shutterstock
Is it Wise to Retain Healthpeak (PEAK) Stock in Your Portfolio?
Healthpeak is well-poised to benefit from its diversified and top-quality portfolio across three core asset classes of lab, outpatient medical and continuing care retirement community (CCRC) real estate in the United States. Solid demand for lab assets and an expected rise in senior citizens’ healthcare spending position the company well to ride the growth curve. However, competition from industry players and a high interest rate environment add to its woes.
What’s Aiding It?
The increasing life expectancy of the U.S. population and biopharma drug development growth opportunities have promoted the lab real estate market fundamentals lately and led to a rise in demand for such assets. Also, the use of artificial intelligence and machine learning is likely to increase the probability of success in drug research and lower the timeline for development, indicating a rise in the allocation of healthcare spending by healthcare research institutes in the upcoming years.
From the beginning of 2023 through Oct 30, the lab portfolio witnessed year-over-year growth of 4.3% in the cash same-store portfolio net operating income (NOI). With very few lease maturities in the portfolio through year-end 2024, PEAK’s lab portfolio is well-positioned for growth. We expect a year-over-year increase of 4.1% in the segment’s cash same-store NOI in 2023.
With a likelihood of the senior citizen population rising in the years ahead, Healthpeak’s CCRC portfolio, which refers to its retirement communities that include independent living, assisted living and skilled nursing units, is positioned to benefit from the high healthcare expenditures incurred by this age cohort. Our estimate suggests a year-over-year increase of 15.1% in CCRC portfolio’s cash same-store NOI in 2023.
The company maintains a healthy balance sheet position and exited the third quarter of 2023 with around $3 billion of liquidity. It also enjoys long-term credit ratings of Baa1 (Stable) from Moody’s and BBB+ (Stable) from S&P Global as of Sep 30, 2023, rendering it easy access to the debt market at favorable costs. With a sound liquidity position, Healthpeak is well-placed to bank on growth opportunities.
Further, PEAK’s current cash flow growth is projected at 55.80% compared with 8.10% estimated for the industry.
What’s Hurting It?
Healthpeak operates in a competitive market and contends with several other companies providing similar healthcare services or alternatives such as home health agencies, life care at home, community-based service programs, retirement communities and convalescent centers. The company’s operators contend with peers for occupancy, which could limit the company’s power to raise rents and affect revenues and profitability.
PEAK’s development and redevelopment pipeline, although encouraging for long-term growth, exposes the company to the risks associated with rising construction costs in an inflationary environment. Also, global supply-chain disruptions and labor shortages, including procurement delays and long lead times on certain materials, are negatively impacting the scheduled completion and/or costs of these projects.
Given the current high interest rate environment, Healthpeak may find it difficult to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side. For 2023, we anticipate a year-over-year rise of 17% in the company’s interest expense.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have gained 16.2% compared with the industry's upside of 20%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Stag Industrial (STAG - Free Report) and VICI Properties (VICI - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Stag’s 2023 funds from operations (FFO) per share is pegged at $2.28, suggesting year-over-year growth of 3.2%.
The Zacks Consensus Estimate for VICI Properties’ 2023 FFO per share stands at $2.15, indicating an increase of 11.4% from the year-ago reported figure.
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.