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HCP to Report Q1 Earnings: Is a Beat in Store for the Stock?
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HCP Inc. (HCP - Free Report) is slated to report first-quarter 2018 results on May 3, before the opening bell. Both its revenues and funds from operations (FFO) are expected to have registered declines, on year-over-year basis.
In the last-reported quarter, this Irvine, CA-based healthcare REIT delivered a positive surprise of 2.13%, in terms of FFO per share. Results reflected growth in three-month same-property portfolio (SPP) cash net operating income (NOI).
The company has an impressive surprise history. In fact, over the trailing four quarters, this REIT exceeded estimates in each occasion, generating an average positive surprise of 3.72%. This is depicted in the graph below.
Let’s see how things are shaping up, prior to this announcement.
Factors to Consider
HCP enjoys a diversified, well-balanced portfolio in the healthcare sector. In the to-be-reported quarter, the company is likely to have gained from rising healthcare spending and a growing aging population. Importantly, strategic divestitures, in a bid to lower its Brookdale-portfolio concentration, are anticipated to have driven the company’s Q1 performance.
Subsequently, rental and related revenues are likely to have recorded sequential growth. The Zacks Consensus Estimate of $261 million indicates growth of 2.3% as compared to the prior quarter. Further, per the Zacks Consensus Estimate, revenues from medical office are expected to inch up 0.8% to $121 million as compared with the prior-quarter tally.
Furthermore, during the Jan-Mar quarter, HCP made progress with the sale and transition of 36 senior housing operating assets and 32 triple-net leased communities, operated by Brookdale. During the quarter, 24 senior living communities, owned by HCP, announced shifting their operator from Brookdale Senior Living to Atria Senior Living. This move will considerably decrease Brookdale’s concentration in HCP’s portfolio, increase lease coverage of their remaining triple-net assets leased to Brookdale, improve the diversification of tenants in the portfolio, and enhance credit profile and balance sheet.
Notably, senior living providers have been facing operational and financial challenging times, thanks to the fall in private-pay healthcare, low margins and heavy government control. Amid these, a reduction in Brookdale’s concentration — which is one of the largest senior living providers — bodes well.
In its life-science segment, we estimate occupancy to have been stable as compared to the previous quarter, while revenues are anticipated to be down 2% to $95 million sequentially.
The company remained focused on balance-sheet restructuring in the first quarter. Specifically, it reduced its mezzanine loan investments by selling a loan, secured by interests in skilled nursing and long-term healthcare portfolio, Tandem, to Fundamental Advisors LP, for $112 million.
HCP’s activities during the quarter could not gain adequate analyst confidence. Consequently, the Zacks Consensus Estimate for Q1 FFO remained unchanged at 46 cents in a month’s time. Further, it indicates a 9.8% decline year over year.
A Surprise in Store?
Our proven model shows that HCP has the right combination of the two key ingredients —positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat in the first quarter.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for HCP is +0.22%.
Zacks Rank: HCP carries a Zacks Rank of 3.
Stocks That Warrant a Look
Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to come up with a positive surprise this time around:
Spirit Realty Capital , scheduled to report quarterly numbers on May 1, has an Earnings ESP of +0.49% and a Zacks Rank of 3.
Essex Property Trust (ESS - Free Report) set to report Q1 numbers on May 2, has an Earnings ESP of +0.05% and a Zacks Rank of 3.
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.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
HCP to Report Q1 Earnings: Is a Beat in Store for the Stock?
HCP Inc. (HCP - Free Report) is slated to report first-quarter 2018 results on May 3, before the opening bell. Both its revenues and funds from operations (FFO) are expected to have registered declines, on year-over-year basis.
In the last-reported quarter, this Irvine, CA-based healthcare REIT delivered a positive surprise of 2.13%, in terms of FFO per share. Results reflected growth in three-month same-property portfolio (SPP) cash net operating income (NOI).
The company has an impressive surprise history. In fact, over the trailing four quarters, this REIT exceeded estimates in each occasion, generating an average positive surprise of 3.72%. This is depicted in the graph below.
HCP, Inc. Price and EPS Surprise
HCP, Inc. Price and EPS Surprise | HCP, Inc. Quote
Let’s see how things are shaping up, prior to this announcement.
Factors to Consider
HCP enjoys a diversified, well-balanced portfolio in the healthcare sector. In the to-be-reported quarter, the company is likely to have gained from rising healthcare spending and a growing aging population. Importantly, strategic divestitures, in a bid to lower its Brookdale-portfolio concentration, are anticipated to have driven the company’s Q1 performance.
Subsequently, rental and related revenues are likely to have recorded sequential growth. The Zacks Consensus Estimate of $261 million indicates growth of 2.3% as compared to the prior quarter. Further, per the Zacks Consensus Estimate, revenues from medical office are expected to inch up 0.8% to $121 million as compared with the prior-quarter tally.
Furthermore, during the Jan-Mar quarter, HCP made progress with the sale and transition of 36 senior housing operating assets and 32 triple-net leased communities, operated by Brookdale. During the quarter, 24 senior living communities, owned by HCP, announced shifting their operator from Brookdale Senior Living to Atria Senior Living. This move will considerably decrease Brookdale’s concentration in HCP’s portfolio, increase lease coverage of their remaining triple-net assets leased to Brookdale, improve the diversification of tenants in the portfolio, and enhance credit profile and balance sheet.
Notably, senior living providers have been facing operational and financial challenging times, thanks to the fall in private-pay healthcare, low margins and heavy government control. Amid these, a reduction in Brookdale’s concentration — which is one of the largest senior living providers — bodes well.
In its life-science segment, we estimate occupancy to have been stable as compared to the previous quarter, while revenues are anticipated to be down 2% to $95 million sequentially.
The company remained focused on balance-sheet restructuring in the first quarter. Specifically, it reduced its mezzanine loan investments by selling a loan, secured by interests in skilled nursing and long-term healthcare portfolio, Tandem, to Fundamental Advisors LP, for $112 million.
HCP’s activities during the quarter could not gain adequate analyst confidence. Consequently, the Zacks Consensus Estimate for Q1 FFO remained unchanged at 46 cents in a month’s time. Further, it indicates a 9.8% decline year over year.
A Surprise in Store?
Our proven model shows that HCP has the right combination of the two key ingredients —positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat in the first quarter.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks ESP: The Earnings ESP for HCP is +0.22%.
Zacks Rank: HCP carries a Zacks Rank of 3.
Stocks That Warrant a Look
Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to come up with a positive surprise this time around:
Amanda Hoffer Properties (AHH - Free Report) , slated to release first-quarter results on May 1, has an Earnings ESP of +0.88% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Spirit Realty Capital , scheduled to report quarterly numbers on May 1, has an Earnings ESP of +0.49% and a Zacks Rank of 3.
Essex Property Trust (ESS - Free Report) set to report Q1 numbers on May 2, has an Earnings ESP of +0.05% and a Zacks Rank of 3.
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.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>