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Healthpeak Properties Stock Up 16.5% in 6 Months: Will It Rise Further?
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Shares of Healthpeak Properties (DOC - Free Report) have rallied 16.5% over the past six months, outperforming the industry's upside of 13.8%.
Healthpeak Properties boasts a portfolio of top-quality healthcare real estate assets in the high barrier-to-entry markets of the United States. Solid demand for lab assets amid the increasing need for drug innovation and developments is likely to drive its lab portfolio’s growth.
Its continuing care retirement community (CCRC) portfolio is poised to gain from the rise in senior citizens’ healthcare spending. Encouraging capital-recycling moves and a healthy balance sheet bode well for long-term growth.
Image Source: Zacks Investment Research
Factors Behind DOC Stock Price Surge: Will the Trend Last?
The increasing life expectancy of the U.S. population and biopharma drug development growth opportunities have promoted the lab real estate market fundamentals. 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. This is expected to lead to a rise in the allocation of healthcare spending by healthcare research institutes in the coming years. Healthpeak’s focus on the lab segment is a strategic fit, and it expects the majority of its future growth to be driven by such assets.
Senior citizens constitute the major customer base of healthcare services, and they end up spending more on healthcare services compared to the average population. With an expected rise in the senior citizens’ population in the years ahead, DOC’s CCRC portfolio, which refers to its retirement communities that include independent living, assisted living and skilled nursing units, has a strong upside potential. In the second quarter of 2024, occupancy in its CCRC portfolio was 85.4%.
Healthpeak is making concerted portfolio-repositioning efforts to focus on lab, outpatient medical and CCRC assets. As part of such efforts, the company recycled capital through non-core dispositions of the senior housing operating portfolio (SHOP) and triple-net leased assets to acquire and fund the development of lab and outpatient medical assets in high-barrier-to-entry markets.
On the development front, DOC had four lab development projects underway and six outpatient medical development projects in process as of June 30, 2024. Such expansion moves will enable it to benefit from favorable operating trends and tenant demand, driving growth opportunities for the company.
Healthpeak has been taking steps to bolster its near-term liquidity. The company ended the second quarter of 2024 with total liquidity of around $3.08 billion and a net debt-to-adjusted EBITDAre of 5.2X. Healthpeak had long-term credit ratings of Baa1(Stable) from Moody’s and BBB+ (Stable) from S&P Global as of June 30, 2024. With investment-grade credit ratings, the company can easily access the debt and equity markets to fund capital commitments at favorable costs.
Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 FFO per share revised upward over the past two months to $1.80.
Key Risks for DOC
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. Also, the company’s operators contend with peers for occupancy. This could significantly hurt Healthpeak’s power to raise rents and affect revenues and profitability.
Solid dividend payouts remain the biggest attraction for REIT investors. However, in February 2021, aligning its payout ratio with the targeted lab, outpatient medical, and CCRC portfolio and strategy, the company slashed its dividend by 19% to 30 cents per share from 37 cents paid out earlier. DOC has not resorted to any further dividend hikes and has maintained this dividend amount to date.
Healthpeak’s development and redevelopment pipeline, although encouraging for long-term growth, exposes the company to the risks associated with rising construction costs.
The Zacks Consensus Estimate for Cousins Properties’ 2024 FFO per share is pegged at $2.67, up 1.91% year over year.
The Zacks Consensus Estimate for Centerspace’s2024 FFO per share is pegged at $4.83, up 1.05% year over year.
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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Healthpeak Properties Stock Up 16.5% in 6 Months: Will It Rise Further?
Shares of Healthpeak Properties (DOC - Free Report) have rallied 16.5% over the past six months, outperforming the industry's upside of 13.8%.
Healthpeak Properties boasts a portfolio of top-quality healthcare real estate assets in the high barrier-to-entry markets of the United States. Solid demand for lab assets amid the increasing need for drug innovation and developments is likely to drive its lab portfolio’s growth.
Its continuing care retirement community (CCRC) portfolio is poised to gain from the rise in senior citizens’ healthcare spending. Encouraging capital-recycling moves and a healthy balance sheet bode well for long-term growth.
Image Source: Zacks Investment Research
Factors Behind DOC Stock Price Surge: Will the Trend Last?
The increasing life expectancy of the U.S. population and biopharma drug development growth opportunities have promoted the lab real estate market fundamentals. 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. This is expected to lead to a rise in the allocation of healthcare spending by healthcare research institutes in the coming years. Healthpeak’s focus on the lab segment is a strategic fit, and it expects the majority of its future growth to be driven by such assets.
Senior citizens constitute the major customer base of healthcare services, and they end up spending more on healthcare services compared to the average population. With an expected rise in the senior citizens’ population in the years ahead, DOC’s CCRC portfolio, which refers to its retirement communities that include independent living, assisted living and skilled nursing units, has a strong upside potential. In the second quarter of 2024, occupancy in its CCRC portfolio was 85.4%.
Healthpeak is making concerted portfolio-repositioning efforts to focus on lab, outpatient medical and CCRC assets. As part of such efforts, the company recycled capital through non-core dispositions of the senior housing operating portfolio (SHOP) and triple-net leased assets to acquire and fund the development of lab and outpatient medical assets in high-barrier-to-entry markets.
On the development front, DOC had four lab development projects underway and six outpatient medical development projects in process as of June 30, 2024. Such expansion moves will enable it to benefit from favorable operating trends and tenant demand, driving growth opportunities for the company.
Healthpeak has been taking steps to bolster its near-term liquidity. The company ended the second quarter of 2024 with total liquidity of around $3.08 billion and a net debt-to-adjusted EBITDAre of 5.2X. Healthpeak had long-term credit ratings of Baa1(Stable) from Moody’s and BBB+ (Stable) from S&P Global as of June 30, 2024. With investment-grade credit ratings, the company can easily access the debt and equity markets to fund capital commitments at favorable costs.
Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 FFO per share revised upward over the past two months to $1.80.
Key Risks for DOC
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. Also, the company’s operators contend with peers for occupancy. This could significantly hurt Healthpeak’s power to raise rents and affect revenues and profitability.
Solid dividend payouts remain the biggest attraction for REIT investors. However, in February 2021, aligning its payout ratio with the targeted lab, outpatient medical, and CCRC portfolio and strategy, the company slashed its dividend by 19% to 30 cents per share from 37 cents paid out earlier. DOC has not resorted to any further dividend hikes and has maintained this dividend amount to date.
Healthpeak’s development and redevelopment pipeline, although encouraging for long-term growth, exposes the company to the risks associated with rising construction costs.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Cousins Properties (CUZ - Free Report) and Centerspace (CSR - 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 Cousins Properties’ 2024 FFO per share is pegged at $2.67, up 1.91% year over year.
The Zacks Consensus Estimate for Centerspace’s2024 FFO per share is pegged at $4.83, up 1.05% year over year.
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.